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New legislation filed this week in the US state of New York takes aim at so-called rug pulls and other crypto-specific forms of fraud

Senate Bill S8839, according to public records, “[e]stablishes the offenses of virtual token fraud, illegal rug pulls, private key fraud and fraudulent failure to disclose interest in virtual tokens” per the text of the measure. A companion bill, Assembly Bill A8820, was filed in the New York State Legislature’s lower chamber.

The bills were introduced by State Sen. Kevin Thomas and Assemblymember Clyde Vanel, respectively.

The focus on rug pulls — a term that refers to the sudden exit of a developer or founding team and the theft of investor funds — is a notable one, given the prevalence of such moves in the crypto space, particularly around non-fungible tokens. Last month, federal prosecutors in New York unveiled charges against a pair of defendants in connection with the rug pull of Frosties, a fraudulent NFT project.

The New York legislation proposes limits on the ability of such founding development teams to sell significant percentages of their token holdings within a five-year period.

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