Illinois Senate Passes Bill to Curb Crypto Fraud, Protect Investors

The Illinois Senate has taken a significant step towards enhancing cryptocurrency regulation by passing Senate Bill 1797, also known as the Digital Assets and Consumer Protection Act. The bill, introduced by Senator Mark Walker in February, was approved by a vote of 39 to 17 on April 10. This legislation aims to curb cryptocurrency fraud and protect investors from deceptive practices, including rug pulls and misleading fee structures.

The Digital Assets and Consumer Protection Act grants the Illinois Department of Financial and Professional Regulation the authority to oversee digital asset business activities within the state. Any entity engaging in digital asset business with Illinois residents must register with the state’s financial regulator. Additionally, the bill mandates that crypto service providers offer full disclosure of user fees and charges in advance.

Senator Walker has emphasized the importance of addressing crypto-related fraud in Illinois. In an April 4 post, he stated, “The rise of digital assets has opened the door for financial opportunity, but also for bankruptcy, fraud and deceptive practices. We must set standards for those who have evolved in the crypto business to ensure they are credible, honest actors.” This push for stronger oversight comes in response to a series of high-profile memecoin meltdowns and insider-led scams that have resulted in substantial losses for retail investors.

One of the most notable recent cases was the collapse of the Libra token, a memecoin reportedly endorsed by Argentine President Javier Milei. In March, the project’s insiders allegedly withdrew over $107 million in liquidity, causing a 94% price crash and wiping out roughly $4 billion in market value. This incident, along with others, has sparked regulatory momentum to prevent similar fraudulent activities.

Anastasija Plotnikova, co-founder and CEO of a blockchain regulatory firm, highlighted the need for thorough regulatory attention to insider scams and rug pulls. She stated, “These activities should fall firmly within the jurisdiction of law enforcement agencies.” The latest meltdown occurred on March 16, after Hayden Davis, the co-creator of the Official Melania Meme (MELANIA) and the Libra token, launched a Wolf of Wall Street-inspired token (WOLF). Over 82% of the token’s supply was held by the same entity, leading to a 99% price crash after the token peaked at a $42 million market capitalization.

In response to these incidents, Argentine lawyer Gregorio Dalbon has requested an Interpol Red Notice for Davis, citing a “procedural risk” if Davis were to remain free. This request underscores the global impact of cryptocurrency fraud and the need for international cooperation in regulating the industry.

Illinois’ move to strengthen cryptocurrency regulation follows a similar effort in New York, where Bill A06515 was introduced in March. This bill aims to establish criminal penalties to prevent cryptocurrency fraud and protect investors from rug pulls. These legislative actions reflect a growing trend of regulatory scrutiny in response to the increasing prevalence of cryptocurrency-related scams and fraudulent activities.