SocialChain Inc., which is developing the Pi Network, is facing a $10 million lawsuit for allegedly orchestrating a fraudulent scheme against investors.
According to the complaint, the company is alleged to have transferred tokens without permission, secretly sold 2 billion Pi tokens, and deliberately delayed the network migration. These actions have been reported as the catalyst for the sharp decline in the token's price.
US Securities Fraud Lawsuit Against Pi Network Leadership
The lawsuit was filed on October 24 in the U.S. District Court for the Northern District of California. The judge assigned is Nathaniel M. Cousins. The complaint targets Fon Cheng-Diao and Nicholas Kokkalis, the founders of Pi Network, as well as SocialChain Inc.
The plaintiff from Arizona, Harlow Moan, claims to have suffered significant financial losses due to years of planning and is seeking $10 million in damages.
Mr. Moan claims that on April 10, 2024, 5,137 Pi tokens were transferred without authorization to an unknown address from his verified wallet. He further stated that his inability to migrate the remaining 1,403 tokens to the Pi Network mainnet exacerbated the situation.
The complaint filed by Bulldog Law, representing Arizona cryptocurrency investors, alleges that the defendants and their management conducted a large-scale fraudulent scheme through unauthorized token transfers, a secret sale of 2 billion Pi tokens, and intentional delays in migration, resulting in the token's value plummeting from $307.49 to $1.67.
The complaint also claims that despite marketing the Pi Network as decentralized, the defendants maintained centralized control, operating with only three validator nodes.
He also accused that Pi is an unregistered security, which is a separate issue, a market watcher added.
Pi Core Team silent as the community refutes claims in California fraud lawsuit.
The Pi Core Team has not publicly commented on this lawsuit. However, the Pi community has swiftly countered several of the plaintiff's claims. Many pioneers argue that unauthorized token transfers could be due to leaked login information or phishing attempts, and they point out that these incidents do not prove wrongdoing by the team.
It is also noteworthy that the Pi Network announced the launch of its mainnet in February. OKX, which first listed Pi, introduced it at a minimum price of $2. Subsequently, the Pi coin reached an all-time high of $2.99 in the same month. This raises questions about how the plaintiff arrived at a valuation of $307.49.
Community members suggest that much of the plaintiff's claims are based on losses related to IOU transactions. The Pi Core Team has consistently warned against this price.
Where did the $307.49 come from? â The IOU value has never been this high. Moreover, from a legal perspective, open market value â IOU value. This lawsuit is based on a false equivalence, a user wrote on Reddit.
Overall, this lawsuit has intensified discussions within the Pi community. With the Pi Core Team remaining silent and community members challenging the main claims, the outcome hinges on how the court evaluates the evidence behind the discrepancies in losses and valuations.