Phoenix Community Capital, once a promising DeFi project known as The Phoenix (FIRE), is now embroiled in legal turmoil. Investors allege an exit scam, claiming project assets were misappropriated after leadership changed hands. The man at the center of the controversy, Daniel Ianello, has moved to dismiss the lawsuit filed in Tennessee federal court.
Investors Allege Phoenix FIRE Exit Scam
The lawsuit, filed by aggrieved investors, accuses Daniel Ianello of orchestrating an exit scam following his acquisition of the Phoenix project in October 2022.
According to the complaint, Ianello took control of FIRE’s smart contracts, shut them down, and allegedly moved hundreds of thousands of dollars from investor funds. Plaintiffs also say he deleted posts on Discord, removed past website content, and announced the smart contracts would not be restored.
“This left investors with no recourse and no access to their assets,” the complaint alleges.
Owner Responds: Files Motion to Dismiss
Ianello has formally requested the court dismiss the case, citing lack of jurisdiction. He claims he is a resident of Michigan, not Tennessee, and therefore the court has no personal jurisdiction over him.
In his filing, Ianello also denied involvement in securities sales, stating:
“I acquired the company only after all alleged sales took place. I made no promises or investment solicitations.”
He asserts that plaintiffs are improperly conflating him with the original Phoenix founders, distancing himself from the project’s prior activities.
Phoenix Promised High Returns, Private Investment Access
Before the controversy, The Phoenix advertised itself as a DeFi platform offering exclusive investment access via a “large capital pool of community assets.” It promised profit-sharing from high-yield opportunities and introduced an in-house incubation program for crypto startups.
These features attracted retail investors eager for passive income, but many now view the project’s promises as misleading or outright fraudulent.
Ongoing Rise of Crypto Fraud Cases
The Phoenix case is part of a broader wave of crypto scams, as losses from exploits and frauds have surged. According to CertiK, over $2.47 billion has been lost to crypto scams and hacks in H1 2025.
“Crypto scams, including exit scams, remain a major threat to investor trust and market credibility,” said a blockchain security analyst.
As the case proceeds, investors await a ruling on whether the court will hear their claims or side with Ianello’s motion to dismiss.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.