Pi Network Faces $10M Lawsuit Over Alleged Fraud While Pushing Forward with Testnet2 and Real-World App

A U.S. investor has filed a $10 million lawsuit against Pi Network's parent company SocialChain Inc., Pi Community Company, and network executives, alleging a multi-year fraud scheme. The complaint, filed on October 24, 2025, in the U.S. District Court for the Northern District of California, claims investor Harro Moen suffered losses exceeding $2 million due to unauthorized transfers of 5,137 Pi tokens from his verified wallet in April 2024 and delays in migrating his remaining 1,403 tokens to the Pi Network mainnet.

The lawsuit alleges SocialChain and its executives conducted secret sales of approximately 2 billion Pi tokens and maintained centralized control over the network through three validator nodes. These actions allegedly contributed to a dramatic decline in token value from an IOU figure of $307.49 to around $1.67, affecting millions of users across 190 countries. The investor calculated losses based on the peak market valuation of Pi tokens in 2022, though community members note the $307.49 figure reflects pre-mainnet IOU value rather than open market value.

Simultaneously, Pi Network faces regulatory warnings in China, where financial authorities including the China Futures Association, China Internet Finance Association, China Banking Association, and China Securities Association have warned that virtual assets like Pi Coin lack real-world use and could facilitate illegal fundraising, pyramid schemes, or money laundering.

Despite these legal and regulatory challenges, Pi Network continues development with the activation of Testnet2, which provides improved infrastructure for developers to test features and stress-test transactions ahead of broader Mainnet expansion. The network's AI-based KYC system continues rolling out, processing identity checks faster with higher accuracy while maintaining human validators, with validator rewards on track for Q1 2026.

The ecosystem also saw the launch of BNPi, a booking app that allows users to book hotels and pay with Pi at rates up to 10% cheaper than traditional platforms. The app supports over 15 languages and provides hosts with BNPI token rewards while avoiding high platform fees. This comes as approximately 190 million Pi tokens unlock this month, testing the network's ability to absorb new supply amid growing utility from more than 100 Mainnet-ready apps including gaming platforms like CiDi Games.

Community leaders have dismissed the lawsuit as "rumor-driven fear" designed to shake weak hands, noting no official statement from Pi Core Team confirms material impact on the project. The network continues focusing on real utility through travel bookings, gaming, and payments while preparing for scale with AI-powered identity checks.