Theta Labs Faces Serious Fraud Allegations: Inside the NFT Manipulation Controversy
Introduction: Emerging Legal Troubles for a Crypto Innovator
Theta Labs, a prominent California-based cryptocurrency and blockchain company best known for its pioneering work with NFTs (non-fungible tokens) and decentralized video delivery, now finds itself under the intense scrutiny of courtrooms, regulators, investors, and the crypto world at large. Two former top executives, Jerry Kowal and Andrea Berry, have filed lawsuits in Los Angeles Superior Court accusing the company’s CEO, Mitch Liu, of orchestrating wide-ranging market manipulation tactics, including “pump-and-dump” schemes and the use of fake bids to inflate the value of celebrity-driven NFTs.
These allegations arrive during a turbulent period for the crypto sector, following the implosion of high-profile projects and growing calls for regulation. The lawsuits against Theta Labs shine a spotlight on the pressing problems and regulatory gaps within the NFT and token economy, especially when tied to big-name celebrity partnerships designed to attract consumer attention and investor capital.
The Genesis of the Lawsuits: Whistleblowers Step Forward
The individuals at the heart of these allegations are not outsiders, but former executives with intimate knowledge of Theta’s inner workings. Jerry Kowal, previously high-ranking at Theta Labs, and Andrea Berry, another former leader, allege that CEO Mitch Liu systematically conducted illegal activities for personal enrichment and to benefit select insiders.
Both lawsuits, filed in December 2025, heap blame on Liu, alleging he directed employees to engage in market-manipulation techniques that artificially boosted the prices of Theta-branded NFTs and the company’s native THETA token. These tactics, according to the claimants, ultimately misled investors, employees, and everyday consumers, leaving them vulnerable to unexpected financial losses.
The Katy Perry NFT Scandal: Fake Bids and Market Hype
The strongest and most publicized allegations center on Theta Labs’ partnership with international pop star Katy Perry, which began in 2021. Amid the roaring NFT bull market, the collaboration was hailed as a ground-breaking moment for both the entertainment world and the crypto sector. Digital collectibles linked to Perry’s Las Vegas residency were sold as exclusive NFTs on the Theta network, allowing fans to purchase rare digital memorabilia with supposed long-term value.
According to Jerry Kowal’s legal filing, much of the perceived demand for Perry’s NFTs was, in fact, artificially constructed. Kowal alleges that Liu and selected employees placed fake bids on the NFTs to drive up the auction prices, creating a facade of frenzied demand. This market inflation convinced everyday customers, eager not to miss out on the next big crypto trend, to buy digital assets at prices far above their intrinsic value.
Importantly, these lawsuits do not accuse Katy Perry herself of any involvement in the alleged scheme, and her representatives have not formally commented on the matter. Nonetheless, Perry’s brand and image are now inextricably linked to a controversy that could have reverberations throughout the world of NFT-based celebrity offerings.
Misleading Celebrity Partnerships and Corporate Relationships
While the Katy Perry collaboration is the highest-profile example, Andrea Berry’s lawsuit points to a wider pattern at Theta Labs: the exaggeration or outright fabrication of major partnerships to raise the company’s profile and the value of its tokens. Berry alleges that Theta Labs often touted strategic alliances with world-leading brands, including Google and NASA, to create the illusion of corporate validation and technological legitimacy.
However, further investigation revealed that Theta’s “partnership” with Google was, in reality, a simple commercial relationship involving purchases of Google Cloud computing services — not the kind of strategic or technological alliance suggested in promotional materials. According to whistleblowers, such exaggerations were not isolated incidents, but rather a deliberate business strategy meant to lure both retail investors and influential partners.
By overstating the reach and importance of its corporate connections, Theta Labs is alleged to have misrepresented itself to the public and investors alike, artificially propping up the price and perceived value of the THETA token and its NFT offerings.
The Mechanics of the Alleged Pump-and-Dump Schemes
Perhaps most troubling among the allegations are details of classic “pump-and-dump” strategies. In this scenario, company insiders and leaders would collaborate to artificially boost the market price of Theta-related tokens or assets. This could be achieved through carefully-timed announcements, faked strategic partnerships, controlled leaks, or even, as alleged, through the manipulation of auction-style NFT marketplaces.
Once the value of THETA tokens or related NFTs had been raised and speculative buzz reached its peak, insiders would then reportedly sell their holdings at a profit, just before the market dipped back to its true level—leaving ordinary investors exposed to sudden losses.
The Devastating Financial Fallout: From Token Highs to Lows
In 2021, amid the fervor surrounding the Perry NFT launch and other high-profile partnerships, Theta’s THETA token soared to over $15, cementing its status as one of the sector’s most-watched digital assets. This astonishing ascent was fueled by a perfect storm of speculative buying, media coverage, and overhyped press releases accentuating Theta’s innovative edge and supposed celebrity endorsements.
However, the recent wave of legal scrutiny and whistleblower revelations has triggered a catastrophic reversal. As of December 2025, THETA traded for less than 30 cents—a stunning plunge of over 95% from its peak valuation. Many investors who rode the hype have since been left with steep losses, adding fuel to the lawsuits and drawing the attention of industry regulators and crypto skeptics.
Industry Context: Scandals, Regulation, and the Future of NFTs
The controversy enveloping Theta Labs is not an isolated event but part of a growing series of crises within the crypto and NFT space. Previous months have also seen the spectacular fall of crypto exchange FTX and legal actions targeting celebrity-backed coins and NFTs, intensifying concerns over investor protection, transparency, and fraud.
The lack of mature regulation and oversight in the NFT ecosystem has allowed both innovation and abuse to flourish in tandem. Market manipulation, insider trading, and misrepresentation have become recurring themes, aggravating fears about the safety and reliability of digital assets. Theta Labs now finds itself emblematic of both the sector’s promise and its pitfalls.
Theta Labs Responds: Firm Denies Wrongdoing
In response to the lawsuits, Theta Labs has issued categorical denials, calling the accusations baseless and malicious attempts to damage the company’s reputation amid wider market volatility. Company spokespeople pledge to supply evidence disproving the whistleblowers’ claims and insist that all of Theta’s operations, partnerships, and NFT marketplace activities are in full compliance with applicable laws and industry best practices.
Despite these assurances, the reputational harm is hard to undo. Investors, fans, and potential business partners now confront a cloud of uncertainty, weighing official denials against the specific, granular allegations advanced in court by former internal leaders.
The Broader Repercussions: Trust and Transparency in Crypto
The lawsuits against Theta Labs offer a cautionary tale for the entire crypto industry. With widespread popularity of NFTs and influencer-driven projects, the risks posed by unregulated, opaque practices threaten to undermine trust among mainstream consumers and long-term investors.
For regulatory agencies, this scandal reinforces the urgent need for clear guidance, strict rules, and meaningful accountability for NFT creators, marketplace operators, and lending platforms. As government bodies ramp up enforcement and consider fresh oversight measures, the sector may face a period of turbulent transition toward greater transparency.
Conclusion: A Pivotal Moment for Theta Labs and Crypto Markets
The legal battle between Theta Labs and its former executives stands as a watershed moment for NFT culture, celebrity-driven crypto projects, and tokenized finance at large. Regardless of the outcome in court, the episode already serves as a powerful reminder: in the fast-moving digital asset world, credibility and ethical conduct are as important as technological innovation. Companies, investors, and regulators alike must now work together to restore trust and shape the future of finance in the age of blockchain.
