Pi Network faces a $10 million fraud lawsuit

SocialChain Inc., the developer behind Pi Network, is facing a $10 million lawsuit after an investor accused the company of orchestrating a large-scale fraud scheme.

According to the lawsuit, SocialChain Inc. is accused of conducting unauthorized token transfers, secretly selling 2 billion Pi tokens, and deliberately delaying the network migration process. These actions are alleged to have caused a significant decline in the token’s value.

Federal Securities Fraud Lawsuit Poses Challenge to Pi Network’s Leadership

Court documents indicate that the lawsuit was filed on October 24 at the Northern District Court of California, USA, presided over by Judge Nathanael M. Cousins. The lawsuit targets two Pi Network co-founders—Chengdiao Fan and Nicolas Kokkalis—along with SocialChain Inc.

The plaintiff, Harro Moen Moen from Arizona, claims to have been the victim of a years-long scheme that caused him significant financial losses. He is seeking compensation of up to $10 million.

Specifically, Moen states that 5,137 Pi tokens were transferred from his verified wallet to an unknown address without his consent on April 10, 2024. Additionally, he claims that being unable to transfer his remaining (1,403 tokens) to the Pi Network Mainnet has further aggravated the situation.

“The lawsuit, represented by Bulldog Law on behalf of the Arizona crypto investor, alleges that the defendants and leadership carried out a major fraud scheme through unauthorized token transfers, secretly sold 2 billion Pi tokens, and deliberately delayed network migration, causing the token’s value to plummet from $307.49 to $1.67,” according to a summary of the lawsuit.

The lawsuit also claims that although Pi Network is promoted as a decentralized platform, the defendants maintain centralized control by operating only three validator nodes.

“Another issue raised by the plaintiff is that Pi is accused of being an unregistered security, which could lead to further legal trouble,” a market expert commented.

Pi Core Team Remains Silent, Community Refutes Allegations in California Lawsuit

So far, the Pi Core Team has not issued any official statement regarding the lawsuit. However, the Pi community has quickly spoken out against many of the plaintiff’s claims. Most Pioneers believe that unauthorized token transfers could stem from leaked login information or phishing attacks, and such incidents cannot conclusively be attributed to intentional actions by the team.

It is also worth noting that Pi Network launched its Open Mainnet this past February. OKX—the first exchange to list Pi—set a floor price of $2, and Pi reached a peak of $2.99 that month. This raises questions about how the plaintiff determined a $307.49 price for the Pi token.

Many community members believe that most of the plaintiff’s claims are based on losses related to IOU trading, while the Pi Core Team has repeatedly warned against using this value.

“Where did the $307.49 price come from—even the IOU price never reached that level. Moreover, legally, open market value does not equate to IOU price. This lawsuit is based on a misleading conflation,” commented a Reddit user.

Overall, the lawsuit has sparked much debate within the Pi community. With the development team remaining silent and community members continuously refuting the main allegations, the final outcome will depend on how the court assesses the evidence related to losses and the differing token valuations.

Ông Giáo