Pi Network hit with $10 million fraud lawsuit! 2 billion tokens dumped, risk of going to zero

Pi Network has fallen into a crisis of trust due to a $10 million fraud lawsuit. The plaintiff, Harrow Mohn, alleges a large-scale fraudulent scheme within the project, leading to a 5% drop in the price of PI tokens. The lawsuit reveals three major issues: the unauthorized transfer of 5,137 PI tokens in April 2024, the secret dumping of over 2 billion tokens, and the deliberate delay of network migration causing user losses.

$10 Million Lawsuit Reveals Three Fatal Allegations

(Source: X)

According to court documents, plaintiff Harrow Mohn claims Pi Network’s fraudulent scheme has persisted for years, causing significant financial losses, and he is seeking $10 million in damages. The core of the lawsuit focuses on three fatal allegations, each directly targeting the operational integrity of Pi Network.

The first allegation is unauthorized token transfers. Mohn stated that on April 10, 2024, 5,137 PI tokens in his verified wallet were transferred to an unknown address without his authorization. This incident is not an isolated case—Mohn believes it is part of a systematic conspiracy to dump user funds totaling over 2 billion PI. If true, it suggests a fundamental flaw in Pi Network’s security architecture, with user assets at risk of misappropriation at any time.

The second allegation involves the deliberate delay of mainnet migration. Mohn adds that because Pi Network failed to migrate his remaining 1,403 tokens to the mainnet, he faced significant unrealized losses. Pi Network’s mainnet migration process has been ongoing for over three years since its launch in 2021, and many users’ tokens remain locked in the testnet and cannot be traded. This long-term delay is suspected to be intentional by the team, aimed at controlling the pace of token releases and profiting from it.

The third allegation is the most damaging: centralized control. The suit claims that despite Pi Network being promoted as a decentralized network, the defendants allegedly maintain centralized control by operating only three validator nodes. This stands in stark contrast to the project’s claims of tens of millions of users. If validator nodes are highly concentrated in the hands of the team, it means Pi Network is essentially a centralized system, allowing the team to unilaterally change rules, control transactions, or even freeze user assets.

Triple Blow to Pi Network from the Lawsuit

Collapse of Trust: Unauthorized transfers and secret dumping allegations directly destroy user confidence in platform security.

Regulatory Risk: Fraud allegations could trigger investigations by the US SEC and other regulators.

Developer Exodus: Centralization controversy may drive developers to abandon building applications on Pi Network.

6.1 Million Tokens Unlocked Daily Increasing Selling Pressure

(Source: PiScan)

These allegations may exacerbate Pi Network’s biggest pain point: user adoption. The project already lacks effective application scenarios to support long-term growth, and now developers may abandon the network entirely. Since its launch, Pi Network has emphasized its massive user base (claiming over 50 million), but actual on-chain activity and practical applications remain extremely limited.

An even more severe issue is the ongoing token unlock pressure. According to PiScan data, PI tokens are being unlocked at an average rate of 6.1 million per day. This constant increase in supply, with demand unchanged, inevitably puts deflationary pressure on the price. Under the shadow of the lawsuit, new buyers will be more cautious while holders may accelerate their exit, further worsening the supply-demand imbalance.

Liquidity constraints may become more severe, with short-term speculative trading intensifying deflationary pressure. Currently, PI token trading is mainly concentrated on a few small exchanges, and major platforms like Binance and Coinbase have yet to list the token. This limited liquidity makes the price highly susceptible to large-scale sell-offs; if the lawsuit triggers panic selling, existing liquidity may not be sufficient to absorb it.

Looking at the 30-day unlock schedule, about 183 million PI tokens will enter circulation in the next month—a significant increase relative to the current circulating supply. If the lawsuit continues to ferment, these newly unlocked token holders may choose to sell immediately to avoid risk, creating a downward spiral.

Technical Analysis: $0.37 Support Level as the Last Line of Defense

(Source: Trading View)

Amid the controversy, the price of PI is currently testing a strong support level, which coincides with the lower boundary of a two-month ascending triangle and the 0.5 Fibonacci retracement level. This technical overlap makes the area around $0.37 a key battleground for bulls and bears. Ascending triangles are typically seen as bullish continuation patterns, but the lawsuit may completely alter technical expectations.

Momentum indicators show early signs of bullish sentiment. The Relative Strength Index (RSI) has rebounded from near oversold levels, which often signals a bottom in a pullback. The MACD indicator is also approaching a bullish crossover above the signal line, a sign of strengthening momentum. From a purely technical perspective, these signals support a possible short-term rebound.

In an optimistic scenario, if the $0.37 support holds, it may facilitate a price breakout to the $0.40 target, about an 8% increase from current levels. This would require the lawsuit to be seen by the market as an isolated rather than systemic issue, and for the token unlock pace to slow or new positive news to offset the negative impact.

However, the lawsuit may severely damage market sentiment and disrupt the slow growth momentum. In a pessimistic scenario, if the lawsuit continues to ferment or more victims come forward, PI price may break below the $0.37 support, heading toward the historical low of $0.15—a 30% drop. This level appeared in the early days of the project and, if revisited, would mark a complete collapse of market confidence in Pi Network.

The most extreme scenario would see a drop to $0.075 at the 1.618 Fibonacci retracement level, a 65% decline from current prices. Below this area, there is almost no historical support to cushion the downside risk, creating a dangerous gap zone. Should this happen, it would be very close to zero, and Pi Network may become yet another failed crypto project.