NY State Senate Bill 2025-S7824

Current Bill Status - In Senate Committee Codes Committee

Introduced
- In Committee Assembly
- In Committee Senate
- On Floor Calendar Assembly
- On Floor Calendar Senate
- Passed Assembly
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Delivered to Governor
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	Assembly Actions - Lowercase Senate Actions - UPPERCASE
May 09, 2025	referred to codes

2025-S7824 (ACTIVE) - Details

See Assembly Version of this Bill:: A6515
Current Committee:: Senate Codes
Law Section:: Penal Law
Laws Affected:: Add Title K Art 191 §§191.00 - 191.20, Pen L
Versions Introduced in Other Legislative Sessions:: 2021-2022: S8839, A8820
2023-2024: S359, A944

2025-S7824 (ACTIVE) - Summary

Establishes the offenses of virtual token fraud, illegal rug pulls and private key fraud.

2025-S7824 (ACTIVE) - Sponsor Memo

                                 
BILL NUMBER: S7824

SPONSOR: LIU
 
TITLE OF BILL:

An act to amend the penal law, in relation to establishing certain
offenses relating to crypto fraud

 
PURPOSE OR GENERAL IDEA OF BILL:

Establishes certain offenses relating to crypto fraud.

 
SUMMARY OF SPECIFIC PROVISIONS:

Section 1 creates article 191 of the penal law of Title K of the penal
law. 191.00 provides important definitions.

§ 191.05 creates penalties that apply to every provision of the act.

§ 191.10 creates the crime of virtual token fraud. § 191.15 creates the
crime of illegal rug pulls. § 191.20 creates the crime of private key
fraud.

 
DIFFERENCE BETWEEN NEW AND ORIGINAL:

Removes the crime of fraudulent failure to disclose interest in virtual
tokens.

Amends the definition of rug pull to be based on the conduct of the
actor rather than on specifying how the amount that they can sell within
a certain period of time. Creates exceptions to the types of trans-
actions which are not considered rug pulls.

Amends definitions for clarity.

 
JUSTIFICATION:

Blockchain technology has lately risen to the forefront of the American
consciousness as the foundation for the future of secure technology.
Despite the fact that the internet has become critical in both our
economic and political structures, we have been held back by the lack of
impenetrable technology that exists to allow us to engage in activities
to our democracy and our economic system. Blockchain technology is the
first type of impenetrable code, which means it cannot be hacked, manip-
ulated, controlled, or destroyed by malicious parties. As a result,
blockchain technology has pushed us to the brink of the future, allowing
us to conduct historically risky online activities such as storing and
moving money, investing, producing one-of-a-kind art, and even voting in
elections.  With 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.

Rug pulls are now wreaking havoc on the cryptocurrency industry. A rug
pull is the act of an unscrupulous virtual token developer creating
virtual tokens, advertising them to the masses as investments, causing
them to rise steeply in price (often hundreds of thousands of percent),
retaining a large supply of the tokens that they created for themselves,
and then selling them all at once, causing the price to plummet instant-
ly. Famous instances include Squid Game Coin ($SQU1D), which began at a
price of $0.016 per coin, soared 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.  In other words, the $SQU1D 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.

Private key fraud is, in many ways, analogous to stealing someone else's
debit card pin. When someone obtains or discloses another person's
private key for their virtual token wallet, the other person gains
access to all of the virtual tokens in the owner's wallet. This
frequently arises when criminal mobile app developers construct virtual
token wallets that use keylogging software to steal another person's
private key. In 2021, a mobile application attempting to pass itself off
as a legitimate company stole, what was worth at the time, $1.6 million
of Bitcoin from users through the type of action that might constitute
private key fraud under this act.

 
PRIOR LEGISLATIVE HISTORY:

01/03/24 Referred to codes

01/04/23 Referred to codes

 
FISCAL IMPLICATIONS:

To be determined.

 
EFFECTIVE DATE:
This act shall take effect on the thirtieth day after it shall have.
become law.

2025-S7824 (ACTIVE) - Bill Text download pdf

                             
                     S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   7824
 
                        2025-2026 Regular Sessions
 
                             I N  S E N A T E
 
                                May 9, 2025
                                ___________
 
 Introduced  by  Sen.  LIU  --  read  twice and ordered printed, and when
   printed to be committed to the Committee on Codes
 
 AN ACT to amend the penal  law,  in  relation  to  establishing  certain
   offenses relating to crypto fraud
 
   THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
 BLY, DO ENACT AS FOLLOWS:
 
   Section 1. Title K of the penal law is amended by adding a new article
 191 to read as follows:
                                ARTICLE 191
                               CRYPTO FRAUD
 
 SECTION 191.00 DEFINITIONS.
         191.05 PENALTIES.
         191.10 VIRTUAL TOKEN FRAUD.
         191.15 ILLEGAL RUG PULLS.
         191.20 PRIVATE KEY FRAUD.
 § 191.00 DEFINITIONS.
   FOR PURPOSES OF THIS ARTICLE,  THE  FOLLOWING  TERMS  SHALL  HAVE  THE
 FOLLOWING MEANINGS:
   1.  "VIRTUAL  TOKENS" SHALL MEAN DIGITAL ASSETS THAT EXIST ON A BLOCK-
 CHAIN;
   2. "CLASS" SHALL MEAN A GROUP  OF  FUNGIBLE  OR  NON-FUNGIBLE  TOKENS,
 IRRESPECTIVE OF THE AMOUNT CREATED, THAT IS INTENDED BY THE DEVELOPER TO
 BE:
   (A) IN THE CASE OF FUNGIBLE TOKENS, VALUED AND EXCHANGED TOGETHER; OR
   (B)  IN  THE CASE OF NON-FUNGIBLE TOKENS, REGARDED AS PART OF THE SAME
 GROUP OF DIGITAL OR PHYSICAL ITEMS OR VALUED TOGETHER WITH THE  DEVELOP-
 ERS'  OTHER  NON-FUNGIBLE TOKENS BASED ON THE FACT THAT THE NON-FUNGIBLE
 TOKENS WERE CREATED BY A CERTAIN  DEVELOPER,  TAKING  INTO  ACCOUNT  THE
 DEVELOPER'S  NOTORIETY,  SALE  VOLUME, AND HOW THE DEVELOPER IS REGARDED
 WITHIN VIRTUAL TOKEN COMMUNITIES;
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
                                                            LBD09350-03-5

 S. 7824                             2
 
   3. (A) "DEVELOPER" SHALL MEAN ANY  PERSON  OR  ENTITY  THAT  EXERCISES
 SIGNIFICANT  INFLUENCE OR CONTROL OVER THE CREATION, DESIGN, IMPLEMENTA-
 TION, OR CORE FUNCTIONALITY OF A VIRTUAL TOKEN THROUGH:
   (I)  CREATING  OR  SUBSTANTIALLY  CONTRIBUTING  TO THE TECHNICAL CODE,
 SMART CONTRACTS, OR PROTOCOLS THAT DEFINE THE TOKEN'S FUNCTIONALITY;
   (II)  HAVING  DECISION-MAKING  AUTHORITY  OVER  SIGNIFICANT  TECHNICAL
 CHANGES OR UPGRADES TO THE TOKEN OR ITS UNDERLYING PROTOCOL; OR
   (III)  BEING  PUBLICLY  IDENTIFIED  AS  THE  FOUNDING TEAM CREATOR, OR
 PRIMARY DEVELOPMENT TEAM FOR THE TOKEN;
   (B) THE TERM "DEVELOPER" SHALL NOT INCLUDE PERSONS WHO:
   (I) MERELY PROVIDE TECHNICAL SERVICES UNDER THE DIRECTION OF OTHERS;
   (II) ARE PASSIVE INVESTORS WHO ACQUIRE TOKENS BUT DO  NOT  PARTICIPATE
 IN DEVELOPMENT; OR
   (III) CONTRIBUTE TO OPEN-SOURCE PROTOCOLS THROUGH NON-CORE DEVELOPMENT
 IN A DECENTRALIZED MANNER;
   4.  "NON-FUNGIBLE  TOKEN" SHALL MEAN A VIRTUAL TOKEN USED TO DENOTE ON
 THE BLOCKCHAIN OWNERSHIP OF ANY DIGITAL OR PHYSICAL ITEM OR ANY  DERIVA-
 TIVE MEANS THEREOF;
   5.  "FUNGIBLE TOKEN" SHALL MEAN ANY VIRTUAL TOKEN STORED ON THE BLOCK-
 CHAIN OTHER THAN NON-FUNGIBLE TOKENS;
   6. "OWN", "OWNING" AND "OWNERSHIP"  SHALL  MEAN  THE  MEANS  BY  WHICH
 POSSESSION  OF A DIGITAL ASSET IS NOTED ON THE BLOCKCHAIN OR ANY DERIVA-
 TIVE MEANS THEREOF;
   7. "WALLET" SHALL MEAN A DEVICE, PROGRAM, OR SERVICE WHICH STORES  THE
 PUBLIC AND/OR PRIVATE KEYS FOR VIRTUAL TOKEN TRANSACTIONS;
   8. "BURNING" SHALL MEAN ANY METHOD OF SOMEONE MAKING TOKENS INACCESSI-
 BLE TO ANY PERSON INCLUDING THEMSELF WITH THE INTENTION OF DOING SO;
   9.  (A) "RUG PULL" SHALL MEAN THE ACT OF A DEVELOPER WITH RESPECT TO A
 CLASS OF VIRTUAL TOKENS WHERE SUCH DEVELOPER, WITH INTENT TO DEFRAUD:
   (I) CREATES MATERIAL MISREPRESENTATIONS  OR  OMISSIONS  REGARDING  THE
 DEVELOPMENT, UTILITY, OR INTENDED PURPOSE OF THE VIRTUAL TOKENS; AND
   (II)  SUBSEQUENTLY SELLS A SIGNIFICANT PORTION OF THEIR TOKEN HOLDINGS
 OR ABANDONS THE PROJECT WITHOUT DELIVERING THE PROMISED FUNCTIONALITY OR
 UTILITY, CAUSING A SUBSTANTIAL LOSS IN TOKEN VALUE PRIMARILY AS A RESULT
 OF SUCH ACTIONS RATHER THAN GENERAL MARKET CONDITIONS;
   (B) A SALE OF VIRTUAL TOKENS BY A DEVELOPER SHALL NOT CONSTITUTE A RUG
 PULL WHERE THE DEVELOPER:
   (I) SELLS THEIR TOKEN HOLDINGS PURSUANT TO A TOKEN SALES PLAN THAT  IS
 DISCLOSED  AT  THE TIME THE CLASS OF VIRTUAL TOKENS IS FIRST MADE AVAIL-
 ABLE TO PERSONS OTHER THAN  DEVELOPERS  THROUGH  A  TRANSPARENT  VESTING
 SCHEDULE OR SIMILAR PUBLIC DECLARATION; OR
   (II)  THE  DEVELOPER'S  TOKEN  SALES OCCUR AT INTERVALS AND IN AMOUNTS
 CONSISTENT WITH  REASONABLE  BUSINESS  OPERATIONS  AND  ONGOING  PROJECT
 DEVELOPMENT;
   10. "BLOCKCHAIN" SHALL MEAN A CRYPTOGRAPHICALLY SECURED DIGITAL LEDGER
 OR DATABASE THAT:
   (A)  FUNCTIONS  AS  A MATHEMATICALLY VERIFIABLE, CONSENSUS-BASED MECH-
 ANISM FOR MAINTAINING A SINGLE VERSION OF A DIGITAL RECORD ACROSS MULTI-
 PLE COMPUTERS OR NODES; AND
   (B) USES A DISTRIBUTED LEDGER TECHNOLOGY, OR OTHER SIMILAR TECHNOLOGY,
 THAT IS MAINTAINED BY A DECENTRALIZED NETWORK OR PARTICIPANTS WHO  VALI-
 DATE  AND  RECORD  TRANSACTIONS  THROUGH A PREDETERMINED CONSENSUS MECH-
 ANISM; AND
   11. "PRIVATE KEY" SHALL MEAN A CRYPTOGRAPHIC SECRET KEY THAT:
   (A) IS MATHEMATICALLY RELATED TO A CORRESPONDING PUBLIC KEY THROUGH AN
 ASYMMETRIC CRYPTOGRAPHIC ALGORITHM;
 S. 7824                             3

   (B) ENABLES THE CRYPTOGRAPHIC PROOF OF CONTROL OVER  SPECIFIC  VIRTUAL
 TOKENS RECORDED ON A BLOCKCHAIN;
   (C) WHEN APPLIED TO A DIGITAL SIGNATURE ALGORITHM, DEMONSTRATES OWNER-
 SHIP OR CONTROL OF SPECIFIC VIRTUAL TOKENS OR BLOCKCHAIN ADDRESSES; AND
   (D) IS DESIGNED TO REMAIN SOLELY IN THE POSSESSION OF THE OWNER OF THE
 ASSOCIATED VIRTUAL TOKENS.
 § 191.05 PENALTIES.
   ANY  PERSON,  PARTNERSHIP, CORPORATION, COMPANY, TRUST OR ASSOCIATION,
 DEVELOPER, OR ANY AGENT OR EMPLOYEE THEREOF WHO VIOLATES THE  PROVISIONS
 OF  THIS  ARTICLE SHALL BE SUBJECT TO A CIVIL FINE OF NOT MORE THAN FIVE
 MILLION DOLLARS OR IMPRISONED NOT  MORE  THAN  TWENTY  YEARS,  OR  BOTH,
 EXCEPT THAT WHERE SUCH A PERSON IS A PERSON OTHER THAN A NATURAL PERSON,
 A FINE NOT EXCEEDING TWENTY-FIVE MILLION DOLLARS.
 § 191.10 VIRTUAL TOKEN FRAUD.
   A  PERSON,  WHETHER  NATURAL  OR OTHERWISE, IS GUILTY OF VIRTUAL TOKEN
 FRAUD WHEN SUCH PERSON ENGAGES IN DECEPTIVE OR FRAUDULENT PRACTICE  WITH
 THE  INTENT  TO  DECEIVE  ANOTHER  IN  RELATION  TO  THE PURCHASE, SALE,
 EXCHANGE, TRANSFER, OFFERING, STORAGE, DESTRUCTION, OR ANY RELEVANT  ACT
 RELATED THERETO OF VIRTUAL TOKENS.
 § 191.15 ILLEGAL RUG PULLS.
   A  DEVELOPER,  WHETHER  NATURAL OR OTHERWISE, IS GUILTY OF ILLEGAL RUG
 PULLS WHEN SUCH DEVELOPER COMMITS A RUG PULL, AS DEFINED IN  SUBDIVISION
 NINE OF SECTION 191.00 OF THIS ARTICLE.
 § 191.20 PRIVATE KEY FRAUD.
   1.  A  PERSON,  WHETHER NATURAL OR OTHERWISE, IS GUILTY OF PRIVATE KEY
 FRAUD WHEN SUCH PERSON OBTAINS OR DISCLOSES TO ANOTHER PERSON OR MISUSES
 ANOTHER'S PRIVATE KEY WITHOUT THEIR AFFIRMATIVE CONSENT, PROVIDED HOWEV-
 ER THAT WHERE THE PERSON CREATED THE PRIVATE KEY, SUCH  A  PERSON  SHALL
 ONLY  BE  PROHIBITED  FROM DISCLOSING TO ANOTHER OR MISUSING THE PRIVATE
 KEY WITHOUT THE OWNER OF THE PRIVATE KEY'S AFFIRMATIVE CONSENT.
   2. CONSENT IS DEEMED AFFIRMATIVE  ONLY  WHERE  IT  IS  OBTAINED  BY  A
 REQUEST  INDEPENDENT  FROM  ANY OTHER REQUEST OR INFORMATION PROVIDED TO
 ANOTHER, IT IS CONSPICUOUS, AND IT INFORMS  THE  PERSON  OF  THE  CONSE-
 QUENCES ASSOCIATED WITH DISCLOSING THEIR PRIVATE KEY TO ANOTHER.
   §  2.  This  act shall take effect on the thirtieth day after it shall
 have become a law. Effective immediately, the addition, amendment and/or
 repeal of any rule or regulation necessary  for  the  implementation  of
 this  act  on its effective date are authorized to be made and completed
 on or before such effective date.

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Senate Bill S7824

Sponsored By

Current Bill Status - In Senate Committee Codes Committee

2025-S7824 (ACTIVE) - Details

2025-S7824 (ACTIVE) - Summary

2025-S7824 (ACTIVE) - Sponsor Memo

2025-S7824 (ACTIVE) - Bill Text download pdf

Comments

Senate Bill S7824

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Sponsored By

John C. Liu

Current Bill Status - In Senate Committee Codes Committee

2025-S7824 (ACTIVE) - Details

2025-S7824 (ACTIVE) - Summary

2025-S7824 (ACTIVE) - Sponsor Memo

2025-S7824 (ACTIVE) - Bill Text download pdf

Comments