Theta Labs Faces Major Fraud Allegations Over Inflated NFTs and Fake Partnerships

Theta Labs, a San Francisco-based blockchain company, is facing serious legal consequences following charges of market manipulation and deceptive business practices. Two former executives have filed lawsuits alleging that CEO Mitch Liu orchestrated schemes to artificially boost the value of the company’s digital assets, particularly through manipulated NFTs and misleading celebrity endorsements. These allegations paint a troubling picture of a company that reportedly used fraudulent tactics to deceive investors and consumers in the volatile cryptocurrency and NFT markets.

From $15 Peak to 99% Collapse: THETA Token’s Dramatic Fall

The most visible indicator of Theta Labs’ crisis is the catastrophic collapse of its THETA token. Once trading above $15 during the 2021 NFT boom, the token has plummeted to approximately $0.21 as of February 2026—representing a devastating 99% decline from its historical peak. This near-total erasure of value closely mirrors the mounting fraud allegations against the company, suggesting that market confidence has been systematically destroyed by revelations of deceptive practices. According to the lawsuits filed in Los Angeles Superior Court in December 2025, former executives Jerry Kowal and Andrea Berry claim that CEO Liu personally profited from this collapse through strategic buying and selling during key announcements, triggering temporary price spikes before engineered crashes that financially devastated ordinary investors.

The Katy Perry NFT Scheme: Allegations of Fake Bidding and Market Deception

At the heart of the fraud allegations lies the company’s high-profile partnership with pop star Katy Perry. In 2021, Theta Labs announced a major collaboration to release NFTs connected to Perry’s Las Vegas residency, positioning this deal as a transformational milestone for the emerging NFT industry. However, Kowal’s lawsuit alleges a far darker reality: Theta executives, under Liu’s direction, systematically placed fraudulent bids on the Katy Perry NFTs to artificially inflate perceived demand and drive prices skyward.

According to the legal filings, employees were allegedly instructed to make these fake bids, creating an illusion of market enthusiasm that misled genuine consumers into overpaying for digital collectibles. The scheme allegedly targeted unsophisticated buyers who relied on visible bidding activity as evidence of an asset’s true market value. Notably, Katy Perry herself has not been implicated in any wrongdoing, and her representatives have declined to comment on the matter. The manipulation of her NFT collection appears to be just one tactical example in a broader pattern of deceptive behavior that Kowal and Berry allege Liu used to artificially inflate the company’s perceived value across multiple ventures.

Beyond NFTs: Alleged Deceptive Partnerships with Tech Giants

The fraud extends beyond NFTs to encompass fabricated or misrepresented relationships with major technology companies. According to Andrea Berry’s lawsuit, Theta Labs falsely advertised strategic partnerships with Google and NASA—two of the world’s most respected organizations—to artificially boost credibility and inflate the THETA token’s valuation. While Theta Labs did purchase cloud computing services from Google, the company allegedly mischaracterized this ordinary customer relationship as a meaningful strategic partnership, fundamentally misrepresenting the nature of their connection.

These misleading claims served a clear purpose: creating an false aura of legitimacy and technological backing that enticed investors to believe Theta Labs possessed credibility it did not actually possess. According to the whistleblowers, such calculated deceptions were designed to artificially enhance the company’s market standing and make it appear far more influential and connected than the reality warranted. Each false partnership claim essentially functioned as a pump mechanism to inflate token valuations before the alleged dumps that enriched Liu and other insiders.

Growing Scrutiny: Theta Labs Within a Broader Crypto Fraud Crisis

The allegations against Theta Labs arrive at a critical moment for the cryptocurrency and digital assets industry. High-profile catastrophes—most notably the spectacular collapse of FTX exchange and the legal consequences faced by celebrities who promoted fraudulent crypto schemes—have triggered widespread regulatory scrutiny and public skepticism about fraud in the sector. Theta Labs now exemplifies the accountability that regulators and prosecutors are beginning to impose on companies that allegedly abused the trust of retail investors and consumers.

The lawsuits represent an escalating pattern: former insiders stepping forward to expose years of allegedly systematic market manipulation, fake bids on NFTs, fabricated partnerships, and insider trading designed to enrich company leadership at the expense of everyday investors. As investigations continue and the case proceeds through Los Angeles courts, Theta Labs’ alleged behavior may set important precedents for how the cryptocurrency and NFT industries are regulated, audited, and held accountable for fraudulent conduct that devastates investor portfolios and undermines market integrity.