SocialChain Inc., which operates the Pi Network, is facing a $10 million lawsuit after investors accuse it of orchestrating a fraud scheme.
The complaint alleges that the company conducted fraudulent token transfers, secretly sold 2 billion Pi tokens, and intentionally delayed network migration. These actions reportedly caused a dramatic collapse in token prices.
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Federal securities fraud lawsuit challenges Pi Network leadership
The lawsuit was filed Oct. 24 in the U.S. District Court for the Northern District of California, according to court documents. It will be assigned to Judge Nathanael M. Cousins. The complaint targets Pi Network founders Chengdiao Fan and Nicolas Kokkalis, as well as SocialChain Inc.
Plaintiff Haro Moen Moen of Arizona alleges that the multi-year scheme resulted in significant financial losses. He is seeking $10 million in damages.
Moen claims that on April 10, 2024, 5,137 Pi tokens were transferred from his verified wallet to an unknown address without his permission. He further added that the situation was exacerbated by the failure to migrate the remaining 1,403 tokens to the Pi network mainnet.
“The complaint filed by Bulldog Law on behalf of cryptocurrency investors in Arizona alleges that the defendants and their executives executed a massive fraud scheme through fraudulent token transfers, secret sales of 2 billion Pi tokens, and deliberate transition delays, causing the token value to plummet from $307.49 to $1.67,” the brief reads.
The complaint also alleges that despite promoting Pi Network as decentralized, the defendants maintained centralized control by operating only three validator nodes.
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“He also accuses Pai of being an unregistered security, which is a completely different matter,” the market watcher added.
The Pi Core team has not publicly addressed the lawsuit. However, the Pi community has been quick to dispute some of the plaintiffs’ claims. Many Pioneers claim that unauthorized token transfers can result from compromised login credentials or phishing attempts. They added that these incidents do not prove wrongdoing by the team.
It’s also worth noting that Pi Network launched Open Mainnet in February. OKX, the first exchange to list Pi, introduced it at a minimum price of $2. Later that month, Pi coin reached an all-time high of $2.99. This raises the question of how the plaintiff arrived at the $307.49 valuation.
Community members have suggested that a significant portion of the plaintiffs’ claims are based on losses associated with the IOU transactions. The Pi Core team has consistently warned against this price.
“Where did “$307.49” come from? Even the value of the IOU wasn’t that high. Also, from a legal perspective, open market value ≠ IOU value. This lawsuit is based on false equivalence,” a user wrote on Reddit.
Overall, this lawsuit has intensified debate within the Pi community. With the Pi core team remaining silent and community members disputing key claims, the outcome will depend on how courts evaluate the evidence behind the losses and valuation discrepancies.
