Four years ago, California startup Theta Labs' cryptocurrency was soaring and its future looked bright when it partnered with pop star Katy Perry.
A Bay Area company has created a marketplace for digital collectibles known as non-fungible tokens, or NFTs, and teamed up with Perry to launch NFTs tied to her Las Vegas concert residency. Its THETA token jumped over 500% in early 2021, peaking at over $15, making it one of the most valuable cryptocurrencies in the world. Later that year, the company was thrust into the spotlight when it announced a partnership with Perry.
“I can’t wait to dive into all the exciting and memorable creative pieces with the Theta team so my fans can enjoy the special moment of my residency,” Perry said in a June 2021 press release.
Today, like many cryptocurrencies, THETA is 95% below its 2021 peak. The company took a hit this week after former executives accused it of manipulating markets to deceive consumers into buying its products. It was trading at less than 30 cents on Tuesday.
Two former Theta Labs executives have sued the startup, alleging in separate lawsuits that the company and its CEO Mitch Liu engaged in fraud and manipulated the cryptocurrency market to their advantage. Liu retaliated against them after employees refused to engage in deceptive business practices and raised concerns, the lawsuits say.
According to the December lawsuits filed in Los Angeles Superior Court, some of the alleged misconduct included placing false bids on Perry's NFTs, participating in token “pump and dump” schemes, and using celebrity endorsements and “misleading” partnerships with well-known companies like Google to defraud the public.
Perry is not accused of any wrongdoing in the lawsuit, and Teta denies the allegations.
The lawsuits against Theta Labs are the latest controversy to rock the scandal-plagued industry.
Cryptocurrency exchange FTX collapsed and its founder Samuel Bankman-Fried was sentenced to 25 years in prison in 2024 after being found guilty of multiple fraud charges. Binance founder and former CEO Changpeng Zhao also received a prison sentence after pleading guilty to violating money laundering laws, but was pardoned by President Trump this year.
The US Securities and Exchange Commission has previously accused celebrities such as Kim Kardashian, Lindsay Lohan, Jake Paul and Ne-Yo of promoting cryptocurrency without disclosing that they were paid to do so.
Theta Labs created a network that rewarded people with cryptocurrency for providing free bandwidth and computing power to improve video streaming and reduce content delivery costs. The company describes Theta Network as a “decentralized blockchain-based cloud for artificial intelligence, media and entertainment.” There are two tokens on the network: THETA, used to secure the network, and TFUEL, used to pay users for electricity services and transactions.
The whistleblowers suing Theta Labs are Jerry Koval, a former head of content, and Andrea Berry, formerly the company's head of business development.
“Liu used Theta Labs as his personal trading tool, committing fraud, self-dealing and market manipulation,” said Mark Mermelstein, Cowell’s lawyer, in a statement. “His calculated pump-and-dump schemes have repeatedly destroyed the value of employees and investors. This lawsuit seeks to demand accountability and prove that no one is above the law.”
Teta, Liu and its parent company Sliver VR Technologies deny the allegations and “intend to prove the stories told in the lawsuits to be false,” according to Kronenberger Rosenfeld, the law firm representing the defendants. According to the firm's lawyer, these lawsuits are an attempt to portray the company in a negative light in hopes of a settlement.
Koval has already sued his former employers. In 2014 he accused Netflix of spreading false claims that he stole confidential information and Amazon of wrongful termination.
The latest lawsuits allege that Liu profited from the purchase and sale of THETA tokens using insider knowledge of partnerships with celebrities, studios and others in the entertainment industry.
“Liu’s true motive in entering into this partnership was not to develop a sustainable content business, but to create advertising that could be used to artificially inflate token prices for Liu’s personal gain,” Koval’s lawsuit states.
Koval worked at Theta from 2020 to 2025.
According to the lawsuit, in 2020, Liu traded and sold tokens knowing that the company would close a content licensing deal with MGM Studios. Following the announcement of the deal, the market capitalization of the THETA token increased by more than $50 million in just 24 hours, the lawsuit states.
As NFTs began to gain traction in 2021, Koval struck deals with high-profile partners like Perry, Fremantle Media and Resorts World Las Vegas for the startup's NFT marketplace.
As part of the deal with Perry, the singer received $8.5 million and additional guarantees for the right to license her image and image for NFTs.
To drive up the price and demand for these digital collectibles, Liu allegedly bid on the NFTs and ordered employees to do the same. This led to people overpaying for the Perry NFT.
Representatives for Perry did not immediately respond to requests for comment.
The lawsuits provide numerous examples of alleged manipulation. In one case, a startup launched a new token in 2022 called TDROP, which employees also received as a bonus.
According to Koval's lawsuit, Liu gained control of 43% of the cryptocurrency supply. When the TDROP token peaked, he sold it and within a few months its price dropped by more than 90%.
Berry's lawsuit also alleges that Theta Labs announced “misleading” or false partnerships with well-known companies such as Google and organizations including NASA in order to increase the value of the THETA token. According to the suit, Theta paid for Google Cloud products but claimed to be a partner when it was a Google customer.
