Pi Network lawsuit storm! Secret sale of 2 billion tokens exposed, founder accused of securities fraud

Pi Network became embroiled in a major controversy on October 24, 2025, when a leaked U.S. federal lawsuit document accused its founders, Chengdiao Fan, Nicolas Kokkalis, and related entities of securities fraud. The lawsuit alleges unfair token distribution, asset withholding, excessive centralization, and manipulation through the secret sale of approximately 2 billion Pi tokens.

Federal Lawsuit Reveals Secret Sale of 2 Billion Tokens

(Source: X)

The lawsuit against Pi Network was filed in U.S. federal court on October 24, 2025, directly targeting the project’s two co-founders, Chengdiao Fan and Nicolas Kokkalis. After the lawsuit document was leaked online, it quickly caused a stir in the Pi Network community due to its harsh accusations against the project’s operational model.

The core allegations of the lawsuit include securities fraud, token manipulation, and centralized control. The most shocking claim is that the Pi Network founders secretly sold around 2 billion Pi tokens—an astounding number for a project whose mainnet has not yet officially launched open trading. Plaintiffs allege these token sales occurred on third-party IOU markets, and through Pi token futures or certificates offered by CEXs, without proper disclosure to the community.

Four Core Issues Alleged in the Lawsuit

Securities Fraud: Accuses Pi Network of selling tokens as investment contracts without registering with the U.S. Securities and Exchange Commission (SEC).

Unfair Token Distribution: Questions the core team’s retention of an excessive token supply, leading to unfair distribution.

Asset Withholding: Alleges the project arbitrarily withholds or freezes users’ Pi tokens without clear rules.

Excessive Centralization: Criticizes Pi Network for concentrating decision-making power among its founders, contrary to the spirit of decentralization.

Exposure within the Pi Network community has amplified the impact of these accusations, warning that if proven true, Pi’s value and community trust would plummet. The report also urges the Pi core team to take action to prevent further panic from spreading throughout the ecosystem. Such pressure from social media and independent analysts shows that Pi Network is facing an unprecedented PR crisis.

Legal Proceedings and Community Division

As of December 7, 2025, the lawsuit remains in its preliminary stage. According to court documents, both parties have agreed to a waiver of service, and a formal response is due by December 23. No judgment or factual finding has yet been made, meaning all claims are currently just allegations by the plaintiffs and have not been verified through legal process. However, in the crypto space, the mere existence of a lawsuit can trigger market panic and a crisis of trust.

Although the case is still in its early stages, it has already sparked heated debate within the International Pi Association. The Pi Network community is clearly divided, with supporters and critics holding opposing views. Supporters argue that the lawsuit targets third-party IOU markets, not the Pi Network ecosystem or the soon-to-be-launched mainnet Pi Coin. They emphasize that these IOU markets are speculative tools created by exchanges and are not directly related to Pi Network, nor can the founders control transactions on third-party platforms.

On the other hand, critics contend that these allegations are consistent with longstanding criticisms of Pi Network’s lack of transparency, delayed mainnet launch, and centralized token supply. Since its launch in 2019, Pi Network has been running for over six years without a fully open mainnet, raising questions about the project’s progress and the management team’s competence. Critics point out that if the founders did secretly sell 2 billion tokens, it would be a serious betrayal of community trust.

These accusations are even more damaging because Pi Network’s 2025 development updates have focused on decentralization and utility growth. The team has promised a gradual mainnet rollout and increased decentralization, but the lawsuit’s centralization allegations directly contradict these commitments. Failing to respond promptly will only widen this perception gap and further erode community trust.

Fragile Market Sentiment and Sell-Off Risk

With no evidence yet confirming the allegations, speculation remains as to whether these claims could trigger a massive sell-off in the Pi-sensitive market, especially in regions where the project is popular. Pi Network has a large user base in developing areas such as Southeast Asia, Africa, and Latin America, where users often see Pi tokens as a potential wealth opportunity. News of the lawsuit could spark panic selling in these regions.

Although the Pi mainnet is not yet open for trading, community-based Global Consensus Value (GCV) markets and barter systems may experience volatility due to concerns over the lawsuit’s impact. GCV is a value consensus formed organically within the Pi community, with users exchanging goods and services for Pi tokens in local markets. If the lawsuit leads to a collapse in trust, the value of Pi tokens in these informal markets could drop sharply.

Even more concerning, third-party IOU markets may experience extreme volatility. On CEXs, Pi tokens are traded as futures or certificates, with prices driven mainly by speculative sentiment. The lawsuit could trigger panic selling in these markets, affecting the overall valuation expectations for Pi Network. Even though these IOU markets have no direct relationship with the official Pi Coin, the spread of negative sentiment could damage the project’s long-term prospects.

Influential opinion leaders and analysts in the X (formerly Twitter) space insist that the Pi core team must act immediately. They argue that failing to respond will only deepen mistrust and fuel the spread of misinformation. In an era of rapid information dissemination on social media, silence is often interpreted as tacit admission or evasion, further undermining the project’s credibility.

Core Team Faces Pressure to Respond and Future Direction

Many are demanding that the Pi core team respond immediately to prevent panic. Community members across various platforms are calling on the founders to issue an official statement explaining the details of the lawsuit, the transparency of token distribution, and the project’s decentralization progress. Only open and transparent explanations can avoid long-term reputational damage; otherwise, this lawsuit could become a turning point in Pi Network’s history.

From a legal standpoint, Pi Network needs to submit a formal response by December 23. The content of this response is critical—it must not only address the specific allegations in the lawsuit but also demonstrate the project’s integrity and transparency to the community. If the response can provide convincing evidence of fair token distribution, transparent operations, and the absence of malicious manipulation, it may allay community concerns.

However, if the response fails to effectively refute the allegations or the core team chooses to delay its reply, Pi Network may face an even more severe crisis of trust. In the worst case, this could lead to further delays to the mainnet launch, a massive loss of users, or even more legal action. For a project that has been operating for six years without a fully open mainnet, any additional negative news could be the last straw.