Inside the Theta Labs Katy Perry NFT Scandal—From Peak Valuations to Fraud Allegations

California-based cryptocurrency firm Theta Labs has become the center of a growing market manipulation scandal, with former executives alleging that CEO Mitch Liu orchestrated a scheme to artificially inflate NFT valuations tied to pop star Katy Perry. The controversy, detailed in lawsuits filed in Los Angeles Superior Court in December 2025, raises critical questions about fraud, insider trading, and deceptive practices in the digital collectibles space.

The Katy Perry NFT Controversy at the Heart of the Case

Theta Labs initially gained prominence in 2021 after striking a high-profile partnership with Katy Perry to create NFTs linked to her Las Vegas residency. The collaboration was heralded as a watershed moment for the company’s NFT ambitions. However, according to lawsuits filed by former executives Jerry Kowal and Andrea Berry, the Katy Perry NFT initiative became a vehicle for market manipulation.

The accusations paint a troubling picture: Theta Labs allegedly employed fake bidding tactics on Katy Perry’s digital collectibles to artificially drive up perceived demand and prices. Court filings suggest that Liu directed employees to place fraudulent bids, misleading consumers into overpaying for these NFTs. What appeared to investors and collectors as organic market interest was, according to the whistleblowers, a coordinated scheme to artificially pump valuations.

Katy Perry herself has not been implicated in any wrongdoing, and her representatives have declined to comment on the allegations. Nonetheless, the Katy Perry NFT line has become emblematic of Theta Labs’ alleged broader pattern of deceptive practices.

Broader Fraud Allegations Beyond the Katy Perry Partnership

The Katy Perry NFT manipulation is presented in the lawsuits as just one chapter in a larger story of corporate deception. Berry’s lawsuit expands the scope of allegations, claiming that Theta Labs systematically misrepresented its relationships with major brands and technology companies.

According to the filings, Theta falsely marketed strategic partnerships with Google and NASA to inflate its credibility and boost the market value of its THETA token. While the company did purchase Google Cloud services, this customer relationship was allegedly rebranded as a partnership to create an illusion of legitimacy and influence. Such misrepresentations, if substantiated, would indicate a calculated effort to manipulate investor perception and artificially inflate the company’s market standing.

These tactics align with what financial regulators term “pump-and-dump” schemes—strategies where insiders artificially inflate asset prices through deceptive means before cashing out, leaving retail investors to absorb losses.

The THETA Token’s Dramatic Price Collapse

The market consequences have been severe. The THETA token, once valued above $15 in 2021 during the peak NFT euphoria, has experienced a catastrophic decline. As of February 2026, the token trades at approximately $0.21—a nosedive of roughly 89% from its historical peak. This collapse mirrors the timeline of the fraud allegations and underscores the financial damage inflicted on token holders.

The lawsuits allege that Liu leveraged insider knowledge to profit from the token’s volatility, buying and selling positions strategically around major announcements to temporarily spike valuations before orchestrating selloffs. For ordinary investors who believed in Theta Labs’ narrative of celebrity partnerships and technological innovation, the result has been devastating financial losses.

The Broader Crypto Scandal Context

The Theta Labs controversy arrives amid a period of intensifying scrutiny in the cryptocurrency industry. High-profile collapses, such as the FTX exchange implosion, and increased legal action against celebrities and influencers for promoting questionable crypto projects, have sharpened regulatory focus on fraud and misrepresentation in the sector.

Theta Labs faces mounting pressure to address these allegations. The company has denied the fraud claims and stated its intention to present evidence refuting the accusations. However, as former executives pursue legal action, the case threatens to become a defining moment in discussions about accountability, transparency, and investor protection in cryptocurrency markets. The Katy Perry NFT saga, in this context, represents both a specific corporate failure and a broader cautionary tale about unchecked deception in emerging digital asset markets.