California crypto company accused of illegally inflating Katy Perry NFTs and fraud

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Just four years ago, Theta Labs, a California-based cryptocurrency company, was experiencing rapid growth and seemed poised for success, especially after partnering with singer Katy Perry.

A Bay Area company created a marketplace for digital collectibles called NFTs and partnered with Katy Perry to release NFTs related to her Las Vegas shows. Their cryptocurrency, THETA, saw a huge increase in early 2021, rising over 500% and reaching a high of more than $15, making it a leading cryptocurrency globally. The company gained further attention later that year with the announcement of their collaboration with Perry.

I’m so thrilled to be working with the Theta team to create some truly special and memorable items for my fans! I want everyone to be able to own a piece of this incredible experience and have a lasting reminder of my residency. I can’t wait to share it all with you!

THETA, like many cryptocurrencies, has fallen significantly from its high in 2021 – it’s currently down about 95%. This week, the price dropped further after accusations surfaced that former leaders manipulated the market and misled customers. As of Tuesday, THETA was trading for under 30 cents.

Two former Theta Labs executives are suing the company, claiming that CEO Mitch Liu committed fraud and illegally manipulated the cryptocurrency market to personally profit. According to the lawsuits, Liu took action against them after they objected to and refused to participate in what they considered dishonest business dealings.

I’ve been following the legal case, and it’s pretty shocking. Apparently, Perry is accused of some really shady practices. The lawsuits claim he artificially inflated the price of his NFTs by making fake bids. Even worse, he’s accused of manipulating the market with ‘pump and dump’ schemes. To make it look legitimate, they allegedly used celebrity endorsements and falsely implied partnerships with big companies like Google to trick people. It’s all laid out in the court documents filed in Los Angeles.

Perry is not accused of any wrongdoing in the suit, and Theta denies the charges.

The lawsuits against Theta Labs are the latest controversy to rattle an industry beset by scandals.

The cryptocurrency exchange FTX failed spectacularly, and its creator, Samuel Bankman-Fried, received a 25-year prison sentence in 2024 after being convicted of fraud. Changpeng Zhao, who founded and led Binance, was also sentenced to prison for breaking money laundering laws, but President Trump recently granted him a pardon.

The U.S. Securities and Exchange Commission has taken action against celebrities like Kim Kardashian, Lindsay Lohan, Jake Paul, and Ne-Yo for advertising cryptocurrencies without revealing they were compensated for their promotions.

As a huge cinema fan, I’ve been following Theta Network, and it’s a really interesting concept. Basically, Theta Labs built a system where you can earn cryptocurrency by sharing your internet bandwidth and computing power. This helps improve video streaming quality and makes delivering content cheaper. They call it a decentralized cloud powered by blockchain, aimed at things like AI, media, and entertainment. There are two main tokens involved: THETA, which helps keep the network secure, and TFUEL, which is what you earn for contributing and what powers everything on the network.

Jerry Kowal, who used to lead content at Theta Labs, and Andrea Berry, the company’s former business development head, are suing the company.

I was shocked to learn the extent of what Liu allegedly did. According to Mark Mermelstein, the lawyer for Kowal, Liu basically used Theta Labs to enrich himself through dishonest trading practices – things like fraud, dealing with himself instead of acting in the company’s best interest, and even manipulating the market. It sounds like he deliberately inflated the value of Theta Labs and then cashed out, leaving employees and investors with huge losses. This lawsuit, as I understand it, is about making sure he’s held responsible for his actions and showing that everyone, no matter who they are, has to follow the law.

Theta, Liu, and its parent company, Sliver VR Technologies, strongly deny the claims made against them. Their legal team at Kronenberger Rosenfeld states they plan to disprove the allegations with evidence. According to the firm, the lawsuits appear to be an effort to damage the company’s reputation and pressure them into a settlement.

Kowal has previously filed lawsuits against former employers. In 2014, he claimed Netflix falsely accused him of stealing company secrets and that Amazon fired him unfairly.

The new lawsuits claim Liu made a profit by trading THETA tokens, using confidential information about deals with celebrities, film studios, and other companies in the entertainment world.

I was really disappointed to read the allegations in the lawsuit. It claims that Liu wasn’t actually trying to build a lasting content platform with these partnerships. Instead, it suggests he was just trying to create hype – publicity, really – to drive up the price of his own tokens and profit from it personally. It’s a pretty serious accusation, and frankly, it’s upsetting to think that was the real reason behind everything.

Kowal worked for Theta from 2020 to 2025.

According to the lawsuit, in 2020, Liu bought and sold digital tokens while aware that his company was about to finalize a content agreement with MGM Studios. The lawsuit claims that when the deal was publicly announced, the value of THETA tokens jumped by over $50 million in a single day.

In 2021, as NFTs became increasingly popular, Kowal secured partnerships with major names like Katy Perry, Fremantle Media, and Resorts World Las Vegas to launch the startup’s NFT marketplace.

As part of the agreement with Perry, the singer earned $8.5 million, plus rights to potentially earn more through NFTs featuring her image and name.

Liu is accused of artificially increasing the price and popularity of these digital collectibles by placing bids on NFTs himself and instructing his employees to do the same. This resulted in buyers paying more than the Perry NFTs were worth.

Representatives for Perry didn’t immediately respond to a request for comment.

The lawsuits detail several claims of manipulation. For example, in 2022, the company introduced a new token called TDROP, which was also given to employees as a bonus.

According to the lawsuit, Liu acquired 43% of the TDROP cryptocurrency. After the token’s value peaked, he sold his holdings, causing the price to fall over 90% in just a few months.

I’ve been following the lawsuit against Theta Labs, and it’s pretty concerning. It claims they exaggerated their relationships with big companies like Google and even NASA to make their THETA token seem more valuable. Apparently, they were just customers of Google Cloud, paying for their services, but they presented it as a full partnership, which is really misleading. It feels like they were trying to artificially inflate the token’s price, and that’s what the lawsuit is arguing.

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2025-12-24 14:32