U.S. Senator Kevin Thomas Proposes New Bill To Criminalize Rug Pulls

United States Senator Kevin Thomas has proposed new regulations to criminalize rug pulls and other well-known DeFi scams.

Rug pulls become a real problem in the decentralized finance (DeFi) space and have resulted in hundreds of millions stolen from users. This has led to some US politicians taking action and pushing forward new bill to outlaw them.

New York State Senator Kevin Thomas and Assembly member Clyde Vanel introduced Senate Bill S8839, which calls for penalizing, defining, and criminalizing frauds that are specifically targeted at developers and projects designed to deceive crypto investors.

The new bill addresses virtual token fraud, rug pulls, private key fraud, as well as fraudulent failure to disclose an interest in virtual tokens among others.

The term “rug pull” is used to define a certain type of scam where the team behind a project runs away with investors’ funds by draining the liquidity of the trading pool, essentially leaving holders with illiquid tokens that they can’t sell.

The new bill proposal would introduce a threshold of 10% for developers to sell within five years from the date of the last sale:

“A developer, whether natural or otherwise, is guilty of illegal rug pulls when such developer develops a class of virtual token and sells more than ten percent of such tokens within five years from the date of the last sale of such tokens.”