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

Four years ago, California startup Theta Labs’ cryptocurrency was soaring, and its aboriginal appeared agleam erstwhile it landed a concern with popular prima Katy Perry.

The Bay Area institution had built a marketplace for integer collectibles known arsenic nonfungible tokens, oregon NFTs, and had teamed up with Perry to motorboat NFTs tied to her Las Vegas performance residency. Its THETA token jumped by much than 500% successful aboriginal 2021, reaching a highest of much than $15, making it 1 of the world’s astir invaluable cryptocurrencies. Later successful the year, the spotlight shone connected the institution erstwhile it announced the Perry partnership.

“I can’t hold to dive successful with the Theta squad connected each the breathtaking and memorable originative pieces, truthful my fans tin ain a peculiar infinitesimal of my residency,” Perry said successful a June 2021 quality release.

Today, similar galore cryptocurrencies, THETA is 95% disconnected its 2021 peak. It took a deed this week aft erstwhile executives accused it of manipulating markets to dupe consumers into buying its products. On Tuesday, it was trading astatine little than 30 cents.

Two erstwhile executives from Theta Labs sued the startup, alleging successful abstracted lawsuits that the institution and its main executive, Mitch Liu, engaged successful fraud and manipulated the cryptocurrency marketplace for his benefit. Liu retaliated against them aft the employees refused to prosecute successful deceptive concern practices and raised concerns, the lawsuits say.

Some of the alleged misconduct progressive placing fake bids connected Perry’s NFTs, engaging successful token “pump and dump” schemes and utilizing personage endorsements and “misleading” partnerships with high-profile companies specified arsenic Google to deceive the public, according to the December lawsuits filed successful Los Angeles Superior Court.

Perry is not accused of immoderate wrongdoing successful the suit, and Theta denies the charges.

The lawsuits against Theta Labs are the latest contention to rattle an manufacture beset by scandals.

Cryptocurrency speech FTX collapsed, and its founder, Samuel Bankman-Fried, was sentenced to 25 years successful situation successful 2024 aft being recovered blameworthy of aggregate fraud charges. Binance laminitis and erstwhile Chief Executive Changpeng Zhao besides got situation clip aft helium pleaded blameworthy to violating wealth laundering laws, but President Trump pardoned him this year.

The U.S. Securities and Exchange Commission antecedently charged celebrities specified arsenic Kim Kardashian, Lindsay Lohan, Jake Paul and Ne-Yo for promoting crypto without disclosing they were paid to bash so.

Theta Labs created a web that rewarded radical with cryptocurrency for contributing spare bandwidth and computing powerfulness to heighten video streaming and little contented transportation costs. The institution describes Theta Network arsenic a “blockchain-powered decentralized unreality for AI, media and entertainment.” The web has 2 tokens: THETA, utilized to unafraid the network, and TFUEL, utilized to wage users for services and powerfulness operations.

The whistleblowers suing Theta Labs are Jerry Kowal, its erstwhile caput of content, and Andrea Berry, antecedently the company’s caput of concern development.

“Liu utilized Theta Labs arsenic his idiosyncratic trading vehicle, perpetrating fraud, self-dealing, and marketplace manipulation,” said Mark Mermelstein, Kowal’s attorney, successful a statement. “His calculated ‘pump-and-dump’ schemes repeatedly wiped retired worker and capitalist value. This suit is astir demanding accountability and proving nary 1 is supra the law.”

Theta, Liu and its genitor company, Sliver VR Technologies, contradict the allegations and “intend to beryllium with grounds the fallacy of the stories being told successful the lawsuits,” according to Kronenberger Rosenfeld, the instrumentality steadfast representing the defendants. The lawsuits are an effort to overgarment the institution successful a antagonistic airy successful hopes of securing a settlement, a lawyer for the steadfast said.

Kowal has sued his erstwhile employers before. In 2014, helium accused Netflix of spreading mendacious claims that helium stole confidential accusation and Amazon of wrongful termination.

The latest lawsuits allege that Liu profited from buying and selling THETA tokens utilizing insider cognition astir partnerships with celebrities, studios and others successful the amusement industry.

“Liu’s existent motive successful pursuing specified partnerships was not to make a sustainable contented concern but to make publicity that could beryllium utilized to artificially inflate token prices for Liu’s idiosyncratic gain,” Kowal’s suit says.

Kowal worked for Theta from 2020 to 2025.

In 2020, Liu traded and sold tokens knowing that the institution would adjacent a contented licensing woody with MGM Studios, according to the lawsuit. After the deal’s announcement, THETA token’s marketplace capitalization accrued by much than $50 cardinal successful conscionable 24 hours, the suit says.

When NFTs started to instrumentality disconnected successful 2021, Kowal closed deals with high-profile partners specified arsenic Perry, Fremantle Media and Resorts World Las Vegas for the startup’s NFT marketplace.

As portion of the woody with Perry, the vocalist received $8.5 cardinal and further warrants for the close to licence her representation and likeness for the NFTs.

To inflate the terms and request for these integer collectibles, Liu allegedly made bids connected NFTs and directed employees to bash the same. This led to radical overpaying for the Perry NFTs.

Representatives for Perry didn’t instantly respond to a petition for comment.

Multiple examples of alleged manipulation are outlined successful the lawsuits. In 1 lawsuit from 2022, the startup launched a caller token called TDROP that employees besides received arsenic portion of a bonus.

Liu gained power of 43% of the proviso of the cryptocurrency, according to Kowal’s lawsuit. When the TDROP token reached a high, helium past sold the token, and its terms collapsed by much than 90% wrong months.

Berry’s suit besides alleges that Theta Labs announced “misleading” oregon fake partnerships with high-profile companies specified arsenic Google and entities including NASA to pump up the worth of the THETA token. Theta paid for Google Cloud products but claimed it was a spouse erstwhile it was a Google customer, according to the lawsuit.