The Pi Network invitation system may meet the criminal elements of a pyramid scheme.

PseudoIntellectual · 2026-03-05T01:17:28+00:00

The Pi Network's multi-exchange listing raises concerns about its invitation-based structure resembling a pyramid scheme, which could violate Chinese law. Lawyers warn that exceeding three referral levels may incur legal consequences, including prison terms and fines. Regulatory warnings indicate increasing risks for investors involved in such schemes.

PseudoIntellectual

2026-03-05 01:17:28

Abstract generation in progress

Pi Network has been listed on multiple exchanges, and trading in the circulation market has become more active. There are concerns that its sales promotion model may fall under the pyramid scheme crimes defined by Chinese criminal law. According to analysis by lawyer Liu Zhengyao of Zhiheng (Shanghai) Law Firm, the structural problems of this project have been revealed.

Structural Issues of the Invitation Downline System

Pi Network currently operates an invitation-based hierarchical system without substantial project support. Users can develop a downline through invitations to gain benefits such as accelerated mining speed. The profit mechanism created by this invitation system has been pointed out as matching the characteristics of pyramid scheme crimes.

Elements of Pyramid Scheme Crimes as Defined by Chinese Criminal Law

Under Chinese law, such hierarchical recruitment structures are highly likely to qualify as pyramid scheme crimes. Of particular concern is when the downline exceeds three levels. Continuing to recruit downlines beyond this level could result in the organizers being held legally responsible.

Specific Penalties and Criteria for Number of Participants and Amounts

If users earn Pi coins through developing downlines and sell them on exchanges, they may face criminal penalties if certain thresholds are exceeded. In cases where the downline exceeds three levels, there is a possibility of up to five years of imprisonment and fines. Furthermore, if the illegal transaction amount exceeds 2.5 million RMB or the number of users developed surpasses 120, the prison term could be extended to more than five years.

Warnings from Regulatory Authorities and Future Risks

In the second half of 2023, the Public Security Bureau of Hengyang City, Hunan Province, issued an official statement regarding the risks of currency circulation related to this project. This warning suggests that the risks of pyramid scheme crimes following the exchange listing are becoming a reality. Investors need to understand that participation in projects with such pyramid structures poses serious legal risks.

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