Four years ago, optimism surrounded California startup Theta Labs as its cryptocurrency, THETA, surged, particularly following a high-profile collaboration with pop superstar Katy Perry. The Bay Area-based company had established a marketplace for nonfungible tokens (NFTs) and partnered with Perry to sell NFTs associated with her Las Vegas concert residency. This partnership catapulted THETA’s value, which soared over 500% in early 2021, peaking at over $15, marking it as one of the world’s leading cryptocurrencies. Perry expressed enthusiasm at the time, stating her eagerness to collaborate with Theta Labs to create unique experiences for her fans.
However, the state of affairs surrounding Theta Labs has dramatically shifted. As of recent reports, THETA has plummeted 95% from its peak, trading at less than 30 cents. This decline follows serious allegations against the company, including claims of market manipulation and fraud made by two former executives, Jerry Kowal and Andrea Berry. In separate lawsuits, they accused Theta Labs and its CEO, Mitch Liu, of engaging in deceptive practices that misled consumers for personal gain.
The lawsuits allege that Theta Labs employed tactics such as placing fraudulent bids on Perry’s NFTs, executing “pump-and-dump” schemes, and misleading the public through purported partnerships with prominent firms like Google. Notably, while Perry is mentioned in conjunction with the NFTs, she is not accused of any wrongdoing in these legal actions. The charges have surfaced amid a turbulent period for the cryptocurrency industry, which has seen multiple scandals, including the notable collapse of cryptocurrency exchange FTX.
Theta Labs was established to create a decentralized network rewarding users for contributing unused bandwidth and computational power, aimed at enhancing video streaming and reducing costs. The company operates on a dual-token system, comprising THETA, which secures the network, and TFUEL, which facilitates user payments.
The whistleblower lawsuits assert that Liu exploited Theta Labs for personal profit through insider trading and market manipulation, significantly harming both employees and investors. Kowal’s attorney described Liu’s actions as calculated schemes that aimed to inflate token prices to benefit himself rather than build a sustainable business. Kowal, who was with Theta from 2020 to 2025, claims Liu traded THETA tokens based on insider knowledge about significant partnership announcements, such as those with MGM Studios, which led to rapid increases in market capitalization.
The legal complaints also detail that as THETA gained traction, Liu allegedly orchestrated bids on NFTs to artificially boost demand and prices, resulting in customers overpaying. Additionally, the lawsuits contend that Theta Labs falsely proclaimed high-profile partnerships, including relationships with NASA and Google, misleading stakeholders regarding its business affiliations. While Theta Labs has denied the allegations and plans to challenge them in court, the situation underscores the ongoing challenges and controversies faced by the cryptocurrency sector.
