SocialChain Inc., the company behind Pi Network, is facing a $10 million lawsuit after an investor accused it of orchestrating a fraudulent scheme.
The complaint alleges that the company executed unauthorized token transactions, secretly sold 2 billion Pi tokens, and intentionally delayed the network migration. These actions reportedly caused a dramatic collapse of the token price.
Federal securities fraud lawsuit disputes Pi Network leadership
According to court documents, the lawsuit was filed on October 24 in the U.S. District Court for the Northern District of California. It has been assigned to Judge Nathanael M. Cousins. The complaint targets Pi Network founders Chengdiao Fan and Nicolas Kokkalis, as well as SocialChain Inc.
The plaintiff, Harro Moen Moen from Arizona, claims a multi-year strategy that led to substantial financial losses. He is seeking $10 million in damages.
Moen claims that 5.137 Pi tokens were transferred from his verified wallet to an unknown address without his consent on 10 April 2024. He added that the situation was exacerbated by the failure to migrate his remaining 1.403 tokens to the Pi Network Mainnet.
"The complaint, filed by Bulldog Law on behalf of a cryptocurrency investor from Arizona, alleges that the defendant and his executives executed a large-scale fraudulent scheme through unauthorized token transfers, secret sales of 2 billion Pi tokens, and intentional migration delays causing token values to plummet from $307.49 to $1.67," the summary reports.
The complaint also states that, despite Pi Network being promoted as decentralized, the defendants would have retained centralized control by operating only three validator nodes.
"He also accuses Pi of being an unregistered security, which is a completely different issue," added a market observer.
Pi Core Team remains silent as community challenges claims in California fraud filing
The Pi Core Team has not yet publicly responded to the lawsuit. However, the Pi community has quickly challenged some of the plaintiff's claims. Many Pioneers argue that unauthorized token transfers could be the result of compromised login credentials or phishing attempts. They added that these incidents do not provide evidence of misconduct by the team.
It is also worth noting that Pi Network launched its Open Mainnet in February. OKX, the first exchange to list Pi, introduced it with a floor price of $2. The Pi coin later reached an all-time high of $2.99 that month. This raises the question of how the plaintiff arrived at a price valuation of $307.49.
Community members have suggested that a substantial part of the plaintiff's argument is based on losses related to IOU trading. The Pi Core Team has consistently warned against this pricing.
"Where does "$307.49" come from—even the IOU value was never that high. Also, from a legal standpoint Open Market Value ≠ IOU value. The lawsuit is based on false equivalency," wrote a user on Reddit.
Overall, the lawsuit has intensified the debate within the Pi community. With the Pi Core Team remaining silent and community members challenging significant claims, the outcome will depend on how the court evaluates the evidence behind the alleged losses and valuation discrepancies.