Former Theta Labs Execs Drop Bombshell Lawsuit: Allegations of Fraud, Market Manipulation & Retaliation Rock Crypto Project
Another day, another crypto courtroom drama—this time with a star-studded cast of former executives turning whistleblower.
The Accusations Hit Hard
They're not pulling punches. The lawsuit lobs serious charges straight at the project's leadership: orchestrated fraud, deliberate market manipulation, and a culture of retaliation against those who dared to question the playbook. It paints a picture of internal chaos masked by glossy external marketing—a tale as old as crypto time.
A Pattern or an Outlier?
While the details are specific to Theta, the narrative feels eerily familiar. It hits on the classic tension in decentralized projects: the gap between the ideal of community governance and the reality of concentrated power. When the founders control the keys, who holds them accountable? The lawsuit suggests the answer, in this case, was 'nobody'—until now.
The Fallout Begins
Expect turbulence. Legal battles like this don't just settle quietly; they spill into community forums, spook investors, and attract regulatory side-eye. The timing is never good, but in a market that runs on confidence as much as code, it's particularly brutal. It's the kind of news that makes traditional finance guys smirk into their overpriced coffee—'See? Told you it was all hype.'
The core tech might be sound, but trust, once litigated, is a hell of a thing to rebuild.
Former executives accuse CEO of pump-and-dump schemes
The lawsuits outline a sustained pattern of insider trading related to Theta’s crypto tokens and NFT marketplace, the plaintiffs claim.
Liu’s personal trading operation, known as Theta Labs, was described as involving fraud, self-dealing, and market manipulation, affecting both investors and employees, according to Kowal’s complaint. Liu executed multiple pump-and-dump schemes that artificially increased token prices until insider sell-offs wiped out value, the filing said.
The lawsuits also accuse Theta of manipulation inside the company’s NFT operations. The cases continue, and no court has decided on the allegations.
They allege that fraudulent bids were created to inflate prices on NFTs associated with major celebrity projects. Some of these offerings were tied to collaborations with prominent figures, including pop stars, the complaint said.
Berry’s lawsuit stated that, as a staff member at Theta Labs, she was aware of and reported extensive misconduct by top executives and employees. Her complaint alleges that the moves were all part of an effort to inflate the price of the THETA token and to benefit Liu personally. She also says she faced retribution for raising internal issues.
Former executives dispute Theta’s claims of high-profile partnerships
Much of Berry’s complaint centers on Theta’s public statements regarding strategic partnerships with major companies. Some of those partnerships, the lawsuit claims, were misleading and served to promote a false sense of external validation.
A prime example is one related to Google. Theta said it would form a partnership with Google in May 2020, but Berry claims that it was restricted to a routine cloud services agreement. That scheme, the company said, led to the company paying approximately $7 million for Google Cloud products, making it a customer, rather than a strategic partner.
Under the lawsuit, it is alleged that this misled investors and the broader crypto community about the company’s credibility. Berry’s filing also accuses Theta of engaging in another type of self-dealing, claiming that some of its supposed partners were businesses created and wholly owned by Liu.
Yet those relationships were marketed as independent collaborations under the CEO’s direct control, the lawsuit said.
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