Four years ago, California startup Theta Labs\u2019 cryptocurrency was soaring, and its future appeared bright when it landed a partnership with pop star Katy Perry. <\/p>\n
The Bay Area company had built a marketplace for digital collectibles known as nonfungible tokens, or NFTs, and had teamed up with Perry to launch NFTs tied to her Las Vegas concert residency. Its THETA token jumped by more than 500% in early 2021, reaching a peak of more than $15, making it one of the world\u2019s most valuable cryptocurrencies. Later in the year, the spotlight shone on the company when it announced the Perry partnership. <\/p>\n
\u201cI can\u2019t wait to dive in with the Theta team on all the exciting and memorable creative pieces, so my fans can own a special moment of my residency,\u201d Perry said in a June 2021 news release. <\/p>\n
Today, like many cryptocurrencies, THETA is 95% off its 2021 peak. It took a hit this week after former executives accused it of manipulating markets to dupe consumers into buying its products. On Tuesday, it was trading at less than 30 cents.<\/p>\n
Two former executives from Theta Labs sued the startup, alleging in separate lawsuits that the company and its chief executive, Mitch Liu, engaged in fraud and manipulated the cryptocurrency market for his benefit. Liu retaliated against them after the employees refused to engage in deceptive business practices and raised concerns, the lawsuits say.<\/p>\n
Some of the alleged misconduct involved placing fake bids on Perry\u2019s NFTs, engaging in token \u201cpump and dump\u201d schemes and using celebrity endorsements and \u201cmisleading\u201d partnerships with high-profile companies such as Google to deceive the public, according to the December lawsuits filed in Los Angeles Superior Court.<\/p>\n
Perry is not accused of any wrongdoing in the suit, and Theta denies the charges. <\/p>\n
The lawsuits against Theta Labs are the latest controversy to rattle an industry beset by scandals. <\/p>\n
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 Chief Executive Changpeng Zhao also got prison time after he pleaded guilty to violating money laundering laws, but President Trump pardoned him this year. <\/p>\n
The U.S. Securities and Exchange Commission previously charged celebrities such as Kim Kardashian, Lindsay Lohan, Jake Paul and Ne-Yo for promoting crypto without disclosing they were paid to do so.<\/p>\n
Theta Labs created a network that rewarded people with cryptocurrency for contributing spare bandwidth and computing power to enhance video streaming and lower content delivery costs. The company describes Theta Network as a \u201cblockchain-powered decentralized cloud for AI, media and entertainment.\u201d The network has two tokens: THETA, used to secure the network, and TFUEL, used to pay users for services and power operations.<\/p>\n
The whistleblowers suing Theta Labs are Jerry Kowal, its former head of content, and Andrea Berry, previously the company\u2019s head of business development.<\/p>\n
\u201cLiu used Theta Labs as his personal trading vehicle, perpetrating fraud, self-dealing, and market manipulation,\u201d said Mark Mermelstein, Kowal\u2019s attorney, in a statement. \u201cHis calculated \u2018pump-and-dump\u2019 schemes repeatedly wiped out employee and investor value. This suit is about demanding accountability and proving no one is above the law.\u201d<\/p>\n
Theta, Liu and its parent company, Sliver VR Technologies, deny the allegations and \u201cintend to prove with evidence the fallacy of the stories being told in the lawsuits,\u201d according to Kronenberger Rosenfeld, the law firm representing the defendants. The lawsuits are an attempt to paint the company in a negative light in hopes of securing a settlement, a lawyer for the firm said.<\/p>\n