SocialChain Inc., the company behind Pi Network, is facing a $10 million USD lawsuit after investors accused the company of planning a scam.
The complaint alleges that the company has transferred tokens without authorization, secretly selling 2 billion Pi tokens and intentionally delaying the network migration. These actions have caused the token price to drop sharply.
The U.S. securities fraud case challenges the leaders of Pi Network.
According to court documents, the lawsuit was filed on October 24 in the Northern District Court of California, USA, and is under the supervision of Judge Nathanael M. Cousins. The case targets Pi Network founders Chengdiao Fan and Nicolas Kokkalis, as well as SocialChain Inc.
Plaintiff Harro Moen Moen from Arizona alleges that the company has a comprehensive plan that causes significant financial harm. He is seeking damages of 10 million USD.
Moen claims that 5,137 Pi tokens were transferred from his verified wallet to an unknown address without authorization on April 10, 2024. He added that the situation worsened due to the inability to move the remaining 1,403 tokens to the Pi Network Mainnet.
This complaint was brought by Bulldog Law on behalf of investors in cryptocurrency in Arizona, alleging that the defendants and company executives had a grand scheme through unauthorized token transfers, secretly selling 2 billion Pi tokens and deliberately delaying transfers, causing the token value to drop from 307.49 USD to just 1.67 USD according to the summary.
The complaint also argues that although Pi Network is marketed as decentralized, the defendants still control it centrally by using only 3 validator nodes.
He also alleges that Pi is an unregistered security, which is another significant issue, market analysts added.
The core team of Pi remains silent, even as the community disputes the allegations in the California fraud case.
The core team of Pi has not publicly clarified the lawsuit; however, the Pi community has quickly challenged several claims made by the plaintiff. Many Pioneers assert that unauthorized token transfers may have resulted from login data breaches or internet phishing attempts. They also state that these incidents do not prove any wrongdoing by the team.
Last February, the Pi Network launched their Open Mainnet, with OKX being the first exchange to list Pi, launching at a base price of 2 USD. The Pi coin reached a peak of 2.99 USD. Later that month, this raised questions about how the plaintiff arrived at a price value of 307.49 USD.
Community members have suggested that a key part of the plaintiff's argument hinges on losses related to IOU trading. The core team of Pi has continually warned throughout about this price.
Where did the 307.49 USD come from - even the IOU value has never been that high. Furthermore, from a legal perspective, Open Market Value ≠ IOU Value. This lawsuit is based on false equivalence, one user wrote on Reddit.
Overall, this case has intensified the debate within the Pi community as the core team of Pi remains silent and community members challenge the main claims. The outcome will depend on how the court assesses the evidence regarding losses and differences in price evaluations.
