Theta Labs, Leading Crypto Company, Faces Major Fraud Allegations Over NFT Price Manipulation

Theta Labs, a prominent cryptocurrency company based in California, is embroiled in a significant legal battle centered on accusations of market manipulation and fraudulent business practices. Former executives Jerry Kowal and Andrea Berry have filed lawsuits in Los Angeles Superior Court alleging that CEO Mitch Liu orchestrated schemes to artificially boost the value of digital assets, particularly NFTs associated with celebrity partnerships.

The Dramatic THETA Token Collapse Raises Investor Alarm

The allegations take on heightened urgency when viewed against Theta Labs’ plummeting token performance. Theta’s THETA token, which reached over $15 during the 2021 NFT boom, has suffered a devastating decline. As of February 2026, the token trades at approximately $0.22—representing an 88.83% drop from its 2021 peak. This sharp deterioration mirrors the mounting fraud accusations, with former insiders claiming that CEO Liu profited from insider knowledge by strategically timing token sales during key announcements, causing temporary price spikes followed by devastating crashes.

Orchestrating Fake Bids: The Katy Perry NFT Scandal

At the heart of the allegations lies a high-profile collaboration that turned controversial. Theta Labs initially garnered attention in 2021 after securing a partnership with pop star Katy Perry to release NFTs tied to her Las Vegas residency. What appeared to be a legitimate celebrity venture, according to Kowal’s lawsuit, involved systematic deception. The former executive alleges that Liu directed employees to place fabricated bids on Perry’s NFTs, artificially inflating demand and deceiving consumers into overpaying for digital collectibles with inflated valuations.

The lawsuit explicitly states that this was not an isolated tactic but rather part of a calculated “pump-and-dump” strategy—a scheme where assets are artificially inflated in price before being suddenly offloaded, leaving retail investors holding significantly depreciated holdings. Notably, Katy Perry herself faces no wrongdoing allegations, and the singer’s representatives have remained silent on the matter.

Celebrity Partnerships as Marketing Deception

Beyond the Katy Perry NFT manipulation, Berry’s lawsuit identifies a broader pattern of misrepresentation. Theta Labs allegedly falsified its relationships with major corporations to boost credibility and drive up the THETA token’s market value. The company purportedly claimed strategic partnerships with tech giant Google and NASA—assertions that Berry’s legal filing characterizes as deliberately misleading.

Investigation reveals that while Theta Labs did purchase Google Cloud services, this standard customer relationship was misrepresented to investors as a strategic partnership. Such exaggerations, if proven, exemplify how the crypto company constructed a false narrative of legitimacy and influence to manipulate market perception and artificially inflate its valuation.

The Crypto Industry’s Reckoning

These allegations emerge amid intensifying scrutiny of the entire cryptocurrency sector. The collapse of FTX and subsequent legal action against celebrities promoting crypto schemes have fueled regulatory attention and public skepticism. Theta Labs now faces accountability as former executives seek to hold leadership responsible for the alleged market manipulation and fraudulent marketing practices that harmed employees, investors, and consumers.

The company has denied all allegations, maintaining its intention to provide evidence refuting the claims. Nonetheless, the dramatic depreciation of THETA tokens and the detailed nature of insider testimony suggest the legal battle ahead will significantly shape how the crypto company’s reputation and market standing evolve in the coming months.