The Ponzi scheme risk of Pi Network: Legal experts point out potential criminal activity

According to analysis by lawyer Liu Zhengyao of Zhiheng (Shanghai) Law Firm, the legal risks of Pi Network are becoming clearer. He points out that at the stage where Pi Network has been listed on exchanges and trading has begun in the circulation market, its promotional model may fall under the definition of a pyramid scheme criminal offense under Chinese criminal law.

Problematic Structure Created by the Invitation System

Looking closely at Pi Network’s operational model, it currently lacks substantial support for a physical project. Instead, it has implemented an invitation system that creates a hierarchical member structure. Under this structure, inviters can develop downlines to gain economic benefits such as accelerated mining speeds.

According to lawyer Liu Zhengyao’s analysis, this kind of invitation and hierarchical structure aligns with the typical characteristics of a pyramid scheme prohibited by Chinese criminal law. Especially if Pi coins are obtained through downlines and then sold on exchanges, the legal responsibility could become very serious.

Specific Criminal Penalties Under Criminal Law

If recognized as a pyramid scheme, the legal consequences are significant. When the downline exceeds three levels, the organizer could face up to five years in prison and fines.

Furthermore, if the situation worsens—such as fraudulent transaction amounts exceeding 2.5 million yuan or the number of developers surpassing 120—penalties could increase to more than five years of imprisonment. In other words, once the scale of the pyramid scheme reaches a certain level, harsher punishments are imposed.

Official Warnings from Regulatory Authorities

These concerns are not just theoretical; they are also being monitored by authorities. In July 2023, the Public Security Bureau of Hengyang City, Hunan Province, issued an official statement warning about risks related to currency circulation involving Pi Network. This warning from law enforcement supports the legal expert’s concerns about the potential for pyramid scheme criminality.

The fact that regulators are already aware of the issue serves as an important warning signal for participants. Those involved in Pi Network should fully understand these legal risks and exercise caution in their decisions.