Pi Network's SocialChain Inc. is facing a $10 million lawsuit, accused by investors of manipulating a fraud scheme.
The lawsuit claims that the company unlawfully transferred tokens, secretly sold 2 billion PI tokens, and deliberately delayed the network migration. These actions reportedly caused the token price to plummet.
Securities fraud lawsuit…Challenge to Pi Network leadership
According to court documents, the lawsuit was filed on October 24 in the Northern District Court of California. It has been assigned to Judge Nathaniel M. Kuznets. The defendants are PI Network founders Chandiyao Fan and Nicholas Kokalidis, as well as SocialChain Inc.
Haro Moen, the plaintiff from Arizona, claims to have suffered significant financial losses due to a plan spanning several years. He is seeking ten million dollars in damages.
Moen claims that on April 10, 2024, 5,137 PI tokens were sent to an unknown address without his permission from his verified wallet. He added that the inability to migrate the remaining 1,403 tokens to the PI Network mainnet further exacerbated the situation.
"This lawsuit was filed by the Bulldog Law Firm on behalf of Arizona cryptocurrency investors, alleging that the defendants and executives executed a massive fraud scheme through unauthorized token transfers, secret sales of 2 billion PI tokens, and intentional delays in migration, causing the token's value to plummet from $307.49 to $1.67." – Summary document.
Despite the claim that the PI Network has been decentralized, the defendants argue that they have maintained centralized control. It is said that only three validator nodes were operated.
"Claims have also been made that PI is an unregistered security, which is a separate issue." – A market observer.
PI core team silence, community refutes California fraud allegations
The PI core team has not publicly commented on this lawsuit. However, the PI community has swiftly raised objections to several claims made by the plaintiff. Many pioneers argue that the unauthorized token transfers may have been due to hacking of login credentials or phishing attempts. They added that these incidents do not prove the team's fault.
It is also noteworthy that the PI Network launched its open mainnet in February. OKX was the first exchange to list PI, introducing it at a floor price of $2. By the end of the month, PI coin reached an all-time high of $2.99. Questions are raised about how the plaintiff obtained a valuation of $307.49.
Community members suggested that the plaintiff's claims are based on losses related to IOU transactions. The PI core team has explained that they have continuously warned about this price.
"Where does the figure of '$307.49' come from—IOU values were not even this high. Also, legally open market value ≠ IOU value. This lawsuit is based on a false equivalence" – a user wrote on Reddit.
Overall, this lawsuit has further intensified the controversy within the PI community. The PI core team has remained silent, and community members are raising objections to the core claims. The outcome of this controversy will depend on how the court evaluates the evidence based on the alleged losses and assessment discrepancies.