Good morning, Chair Myrie, Chair May, members of the Committee on Codes and members of the Committee on Consumer Protection. Thank you for the opportunity to testify today regarding the scourge of frauds and scams in our state, and potential legislative remedies to better protect New York residents and businesses.

I’m sure I don’t have to convince you that the proliferation of frauds and scams is a significant problem.

You hear about it from your constituents. And everyone in this room has gotten more calls, texts, and emails than you can count – about allegedly unpaid EZ-Pass tolls, supposed tax debts, your car’s extended warranty. I get them too. Some are easy to ignore, but others are more persuasive. And they are getting harder to detect – as criminals use AI to make scams sound more realistic. New Yorkers encounter scams in numerous forms and contexts when they may not have their guard up – when they’re job hunting, looking for an apartment, seeking immigration legal assistance, or even online dating.

The fact is American businesses and households lose billions annually to scams and workers lose billions to wage theft. Our Investigation Division prosecutes these cases vigorously, but more can be done to modernize our laws, protect vulnerable New Yorkers, hold scammers accountable, and in some cases, recover stolen property.

Several important legislative changes are encompassed in Senator Myrie’s SCAM Act that I want to highlight today.

 

Updating Scheme to Defraud Statute

First, it’s important to update our Scheme to Defraud statute. Currently, if someone engages in a course of conduct with the intent to defraud at least 10 people and succeeds in defrauding at least one person, or obtains property worth at least $1,000 through fraud, they can be charged with Scheme to Defraud in the First Degree, a Class E Felony.

But if the same defendant engages in a course of conduct intending to defraud 50 people, or 100 people, or 1,000 people, they face the same E felony charge. Similarly, whether their scheme nets the scammer $1,000 or $100,000, they face the same E felony.

That makes no sense. Conduct that causes more widespread and more severe harm should be eligible for more severe charges, subject to prosecutorial discretion. Moreover, those who target hundreds or even thousands of potential fraud victims tend to be sophisticated actors. They make a business of scamming people – often the elderly, immigrants, other vulnerable folks – and they are not deterred by the risk of an E felony charge, which can result in no jail time.

The SCAM Act would create additional graduated levels of Scheme to Defraud, similar to the grand larceny statute. Under this proposal, the more money someone steals through fraud, and importantly, the more victims they target, the more severe the potential penalties. The bill also ups penalties if the victims are elderly – as is very commonly the case.

I would note that the Legislature made a similar fix already to address wage theft, by classifying wages as property under grand larceny statute. That allows us to bring more serious charges when the aggregated value of wages stolen is higher. This proposed modification to Scheme to Defraud would provide an additional tool in wage theft cases – and all fraud cases – when there are many victims, but relatively small amounts of money stolen.

Meaningful penalties are essential to deter white collar crimes where sophisticated actors are making risk vs. reward calculations and may be willing to accept the risk of fines, but balk at the prospect of incarceration. That is true in the context of wage theft and immigration scams and investment scams. It is also true in the context of systemic tenant harassment.

Serious consequences, accountability, and deterrence for serious crimes.

 

Aggravated Harassment of Rent Regulated Tenants

While harassment of rent-regulated tenants is not fraud in the traditional sense, it’s not so different from a fake lawyer falsely promising a desperate immigrant that if they pay $5,000, they will secure them a green card even though they can do no such thing. When tenants are denied the use of a safe livable home, despite their landlord’s promise of a habitable dwelling in exchange for rent payments, tenants are essentially being scammed.

My office has several ongoing investigations against landlords who we allege systemically harassed rent-regulated tenants by making conditions in their apartments unlivable. But in many cases, the penalties available do not reflect the extent of the harm to New Yorkers and do not meaningfully deter this shameful conduct.

That’s why I urge the Legislature to pass Senate Bill S8559A, sponsored by Senator Kavanagh, which would create a new class D felony for aggravated harassment of a rent-regulated tenant. Under this law, landlords would face up to 7 years in prison for systemic harassment of rent-regulated tenants across multiple buildings, or recidivist harassment following a conviction for criminal tenant harassment within the previous 5 years.

By creating the crime of Aggravated Harassment of a Rent Regulated Tenant, the Legislature and the Governor can meaningfully deter this egregious conduct and protect vulnerable tenants who currently face the choice between an unlivable apartment and being forced onto the street.

Serious consequences, accountability, and deterrence for serious crimes.

 

CRYPTO Act

The explosion of cryptocurrency as a vehicle for fraud and money laundering is also a growing area of concern – one that fuels not only financial crime but violence as well.

The crypto market is enormous: roughly $3.1 trillion. To put that into perspective, that’s twice the size of the Meta market cap and billions more than the market cap of Amazon.

In 2024, illicit crypto addresses received at least $51 billion worth of cryptocurrency according to the blockchain analysis firm Chainalysis. That’s up from an estimated $11 billion in 2020 – and those are undoubtedly underestimates.

Here’s why the cryptocurrency market is awash in illicit funds.

Let’s say you have an ongoing identity theft operation that needs both to launder proceeds and finance more crime. Previously, you would have to use the traditional banking system. Banks that collect Know Your Customer information – to know who is transmitting money, where it came from, and to monitor transactions for suspicious activity. Banks literally have to file what are called “Suspicious Activity Reports,” which can provide a roadmap to identify fraud.

But now, bad actors can use cryptocurrency. It’s easier, faster, and better protection against getting caught than some of the old-fashioned methods.

And there is a shadow cryptocurrency industry that operates outside of any regulation – without financial controls like Know Your Customer requirements and Suspicious Activity Reports.

That makes cryptocurrency the go-to means for moving and hiding the proceeds of crime – from fraud to gun trafficking, to dark web drug dealing.

Scammers also direct victims to send money via crypto, often by depositing cash into Bitcoin ATMs, because that makes it easy for the scammers to move stolen funds quickly and difficult for victims to recover their funds.

That’s why I support another bill sponsored by Senator Myrie, the CRYPTO Act, which would address this glaring legislative gap by criminalizing operating a virtual currency business without a license.

Currently, an operator of an unlicensed virtual currency business in New York State faces only civil penalties.

That’s not true in the federal system, where a criminal conviction can carry 5 years in prison, and that’s not true of at least 18 other states whose laws against such conduct carry criminal consequences.

The CRYPTO Act would establish criminal penalties for these unlicensed operators, with increasingly severe consequences based on the value of currency and period of time.

Operating a crypto business without a license could risk the operator up to a C felony if $1 million or more crypto is transacted within one year or less. That charge would carry a maximum of 5-to-15 years in state prison.

Serious consequences, accountability, and deterrence for serious crimes.

The SCAM Act, which I mentioned earlier, also contains crucial provisions to support recovery of funds for victims of crypto theft – a process that is unnecessarily laborious and uncertain under current law.

 

Introduction of Routine Business Records in the Grand Jury

Lastly, I want to highlight another provision of the SCAM Act that aims to modernize the process for introducing routine business records in the grand jury. This change, which was also included in the Governor’s budget proposal, would substantially benefit not only our white-collar fraud prosecutions, but our violent crime prosecutions as well.

Of the 22 states that require indictment by a grand jury, New York is the only one that requires a witness to appear in person to authenticate routine business records before they can be admitted as evidence in the grand jury.

This antiquated requirement forces witnesses to travel, often from across the country, just to answer a few basic questions about records that are created in the regular course of business. The result is increased costs for prosecutors, lost productivity for private companies, delayed cases, and wasted taxpayer dollars. It also places a disproportionate burden on under-resourced offices, making it harder to pursue certain cases and undermining fairness and public safety.

The SCAM Act would permit these records to be swiftly introduced through a sworn affidavit, bringing New York’s grand jury procedures in line with modern practice nationwide.

The distinction between records that can be verified by affidavit and those that must be verified in person is arbitrary and antiquated. Phone bills, bank statements, and receipts for internet service may be admitted by affidavit, but credit card statements, retail store receipts, and receipts from ridesharing services like Uber may not. That means if we need to introduce a bank statement from Chase, the bank can authenticate it with an affidavit, but if we want to introduce an Uber receipt, we have to fly an Uber representative from California just to answer a few foundational questions that could easily be addressed in a sworn affidavit. There can also be significant logistical issues relating to the availability of out of state witnesses, like Uber witnesses, within the time constraints we face.

I want to be clear that this change will not prejudice defendants in any way.

And this change would only apply to the grand jury. All records would still have to be authenticated in person in cases that go to trial where defendants have the right to confront witnesses called to testify against them.

During this legislative session, the Governor and lawmakers should make this commonsense reform that would reduce costs, improve fairness, prevent unnecessary delays, and finally end a uniquely burdensome and outdated process. 

Thank you or this opportunity to testify and for your attention to these important challenges facing New Yorker residents and businesses.