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Crypto Regulation

Criminalizing Rug Pulls: Senator Kevin Thomas Proposes New Regulations



Senator K. Thomas has proposed a bill to criminalize rug pulls and other common DeFi scams.

Rug pulls have grown to become a menace in the space of decentralized finance and have resulted in hundreds of millions stolen from users. Being amongst the most common types of scams, some US politicians have taken aim and want to outlaw them.

  • State Senator Kevin Thomas and Assembly member Clyde Vanel have introduced Senate Bill S8839.
  • The bill calls for penalizing, defining, and criminalizing frauds that are specifically targeted at developers and projects designed to dupe cryptocurrency investors.
  • These include but are not limited to virtual token fraud, rug pulls, private key fraud, as well as fraudulent failure to disclose an interest in virtual tokens.
  • For further context – a rug pull is a term used to define a 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 can’t be sold.
  • The bill aims to 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.

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