“Pi Network’s legality has long been a topic of debate in the cryptocurrency community. It is marketed as a revolutionary digital currency that allows users to mine coins from their smartphones. The project has attracted millions of users worldwide, even ranking among the top 20 tokens on CoinMarketCap. However, despite its growing user base and bold promises, some experts in the crypto industry still do not trust the network.
One such expert is Bybit founder Ben Zhou, who expressed skepticism about listing the token on his exchange because of past issues with regulatory bodies.
Justin Bons, founder and Chief Investment Officer of Cyber Capital, also expressed concerns and thinks the project could be a “straight-up scam.
1/9) WARNING: PI is a straight-up scam! ⚠️
Offering an "MLM" based "mining" scheme on mobile is a gimmick, as it does not contribute to consensus!
PI is fully permissioned (centralized) & everything requires KYC, even simple TX's!
PI is an investment scam; it is that bad: 🧵
— Justin Bons (@Justin_Bons) March 19, 2025A Centralized System Disguised as Decentralized
According to Bons, Pi Network presents itself as decentralized while remaining extremely centralized—a fundamental contradiction that serves as a major red flag. The network is fully permissioned and requires KYC (Know Your Customer) verification for all users, even for simple transactions.
“Pi Network claims to be a revolutionary new decentralized cryptocurrency, but nothing could be further from the truth,” Bons explains. The project delivered its mainnet five years behind schedule with zero innovation, which further raises suspicions about its legitimacy.
Unoriginal Technology with Serious Limitations
Bons points out that Pi core technology was simply copied from Stellar, another permissioned chain. Despite this borrowing, the documentation is described as “a total mess,” which Bons identifies as another concerning sign.
After examining the technical structure, the Cyber Capital founder concludes that Pi is neither scalable nor even programmable, as it lacks a Turing complete virtual machine. This makes decentralized finance applications a pipedream for the Pi ecosystem.
Multi-Level Marketing Tactics
Pi Network deployed what Bons describes as a multi-level marketing scheme through its referral programs. The system kicks back 25% of the “mining” reward through these referrals.
Bons emphasizes that the smartphone “mining” process is entirely pointless and provides no actual contribution to network consensus. Instead, it serves only to lure in uninformed investors while creating significant costs for the network.
Ponzi-Like Mechanisms
Bons identifies additional concerning features within Pi Network’s structure. He compares one mechanism to the controversial HEX project, where users lock up their Pi tokens for several years to increase their “mining” rate.
“This mechanism is designed to lock victims in and artificially pump the price so that insiders can exit,” Bons explains. This strategy creates artificial scarcity while benefiting early participants at the expense of newcomers.
Lack of Transparency
The founder of Cyber Capital also highlights the concerning lack of transparency regarding insider token allocation. Official sources claim there are no insider allocations, yet Bons cites reputable sources indicating the figure may be upwards of 20%.
“It’s ironic and hypocritical for a chain that requires KYC verification from all its users to maintain such secrecy about its own token distribution,” Bons notes.
Read Also: Is Binance Overlooking Pi Coin as It Initiates a New Vote for Altcoin Listings?
A New Twist on Old Scams
Bons clarifies that while Pi Network exhibits characteristics of both MLM and Ponzi schemes, the cryptocurrency versions of these fraudulent models can potentially be even more damaging than their traditional counterparts.
7/9) These mechanisms are not strictly speaking by definition "MLM" & "Ponzi"
As crypto has put its own twist on the formula
In crypto, the variations on these scams are, in fact, worse!
As in a traditional Ponzi, the scammers need to carefully balance paying out old investors
— Justin Bons (@Justin_Bons) March 19, 2025In traditional Ponzi schemes, scammers must carefully balance paying out early investors. However, in cryptocurrency, Bons explains, scammers can “utilize a token money printer while locking it up,” ultimately generating more profit through this digital variation.
Similarly, unlike traditional MLMs that at least offer some product, Bons argues that Pi Network provides no real value—it’s “all smoke and mirrors.”
Industry Embarrassment
Bons expresses particular concern that Pi Network has managed to secure a position among the top 20 cryptocurrencies by market capitalization, calling it “an embarrassment to our industry.”
After just a few hours of research, Bons and his team identified seven major red flags that expose what he considers to be three distinct types of scams operating within the Pi Network ecosystem. He suggests that deeper investigation would likely reveal even more problems.
For investors and cryptocurrency enthusiasts, Bons’ analysis serves as a stark warning about the importance of due diligence and critical evaluation of projects that promise revolutionary benefits with little technical substance to back their claims.
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