New York proposes a bill to safeguard crypto investors from memecoin scams

"From my perspective, these actions should clearly be under the authority of law enforcement agencies," crypto regulation experts told The CryptoScoop.

New York legislators have proposed a bill to protect cryptocurrency investors from rug pull scams, where project insiders suddenly abandon a project and withdraw investor funds.

Assemblymember Clyde Vanel, who chairs the New York Assembly’s Banks Committee, introduced Bill A06515 on March 5. The legislation seeks to impose criminal penalties for cryptocurrency fraud, specifically addressing rug pull schemes.

If passed, the bill would establish new criminal charges under the category of “virtual token fraud,” directly targeting deceptive practices in the crypto space.

The term “virtual tokens” encompasses security tokens and stablecoins, while “security tokens” refer to any type of fungible or non-fungible computer code whose ownership is verified through transaction validation or other derivative methods and is stored on a peer-to-peer network.

The bill follows growing investor frustration with memecoins, especially after the launch of the Libra token, which was backed by Argentine President Javier Milei.

Insiders of the Libra project allegedly withdrew over $107 million in liquidity in a rug pull, causing a 94% price drop within hours and erasing $4 billion in investor funds.

The rise in Solana-based memecoin scams triggered a shift toward safer assets, leading to over $485 million in capital outflows from Solana throughout February.

Rug pulls should be a law enforcement matter, expert says

The surge in memecoin-related scams poses major regulatory challenges, according to Anastasija Plotnikova, co-founder and CEO of blockchain regulatory firm Fideum.

She emphasized that insider scams and fraudulent activities like rug pulls are not only unethical but also clearly illegal, with existing case law supporting enforcement.

"These activities should squarely fall under the jurisdiction of law enforcement agencies," Plotnikova told Cointelegraph.

Concerns have intensified following the collapse of the Milei-endorsed Libra token, with reports suggesting that Libra was an ‘open secret’ among memecoin insider circles. Additionally, some members of the Jupiter decentralized exchange allegedly knew about the token's launch two weeks in advance.