{"id":10457,"date":"2022-05-02T15:18:30","date_gmt":"2022-05-02T15:18:30","guid":{"rendered":"https:\/\/nftandcrypto-news.com\/crypto\/has-new-york-state-gone-astray-in-its-pursuit-of-crypto-fraud\/"},"modified":"2022-05-02T15:18:33","modified_gmt":"2022-05-02T15:18:33","slug":"has-new-york-state-gone-astray-in-its-pursuit-of-crypto-fraud","status":"publish","type":"post","link":"https:\/\/nftandcrypto-news.com\/crypto\/has-new-york-state-gone-astray-in-its-pursuit-of-crypto-fraud\/","title":{"rendered":"Has New York State gone astray in its pursuit of crypto fraud?"},"content":{"rendered":"
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The Empire State made two appearances on the regulatory stage last week, and neither was entirely reassuring.\u00a0<\/p>\n
On April 25, bill S8839 was proposed in the New York State (NYS) Senate that would criminalize \u201crug pulls\u201d and other crypto frauds, while two days later, the state\u2019s Assembly passed a ban on non-green Bitcoin (BTC) mining. The first event was met with some ire from industry representatives, while the second drew negative reviews, too. However, this may have been more of a reflex response given that the \u201cban\u201d was temporary and principally aimed at energy providers. <\/p>\n
The fraud bill, sponsored by State Senator Kevin Thomas, looked to steer a middle course between protecting the public from scam artists while encouraging continued innovation in the crypto and blockchain sector. It would criminalize specific acts of crypto-based chicanery including \u201cprivate key fraud,\u201d \u201cillegal rug pulls\u201d and \u201cvirtual token fraud.\u201d According to the bill\u2019s summary:<\/p>\n
\u201cWith the advancement of this new technology, it is vital to enact regulations that both align with the spirit of the blockchain and the necessity to combat fraud.\u201d\u00a0<\/p><\/blockquote>\n
Critics were quick to pounce, however, assailing the bill\u2019s relevance, usability, overly broad language and even its constitutionality.\u00a0<\/p>\n
The Blockchain Association, for instance, told Cointelegraph that the bill as currently written is \u201cunworkable,\u201d with \u201cthe biggest nonstarter being the provision obligating software developers to publish their personal investments online, and making it a crime not to do so. There\u2019s nothing remotely like this in any traditional industry, finance or otherwise, even for major shareholders of public companies.\u201d<\/p>\n
The association further added that all the specified offenses were already covered under New York State and federal law. \u201cThere\u2019s no good reason to create new offenses for \u2018rug pulls.\u2019\u201d <\/p>\n
Stephen Palley, partner in the Washington D.C. office of law firm Anderson Kill, seemed to agree, telling Cointelegraph that New York State already has the Martin Act. This is \u201can existing statutory scheme that is one of the broadest in the country that, in my view, likely already covers much of what this bill purports to criminalize.\u201d <\/p>\n
A threat to trust<\/h2>\n
On the other hand, it\u2019s hard to deny that fraud dogs the cryptocurrency and blockchain sector \u2014 and it doesn\u2019t seem to be going away. \u201cRug pulls put 2021 cryptocurrency scam revenue close to all-time highs,\u201d headlined a Chainalysis December report. The analytics firm went on to declare these activities a major threat to trust in cryptocurrency and crypto adoption.\u00a0<\/p>\n
The Thomas bill concurred, noting that \u201crug pulls are now wreaking havoc on the cryptocurrency industry.\u201d It described a process in which a developer creates virtual tokens, advertises them to the public as investments and then waits for their price to rise steeply, \u201coften hundreds of thousands of percent.\u201d Meanwhile, these malefactors have stashed away a huge supply of tokens for themselves before \u201cselling them all at once, causing the price to plummet instantly.\u201d<\/p>\n
The summary went on to describe a recent rug pull that involved the Squid Game Coin (SQUID). The token began life at a price of $0.016 per coin, \u201csoared to roughly $2,861.80 per coin in only one week and then crashed to a price of $0.0007926 in less than five minutes following the rug pull:\u201d <\/p>\n
\u201cIn other words, the SQUID creators received a 23,000,000% return on their investment and their investors were swindled out of millions. This bill will provide prosecutors with a clear legal framework in which to pursue these types of criminals.\u201d<\/p><\/blockquote>\n