Theta Labs CEO Mitch Liu has been accused of years-long deception, market manipulation, and misleading partnerships with a major company. Two former Theta employees, Jerry Kowal and Andrea Berry, have filed separate whistleblower lawsuits in a Los Angeles Superior Court, alleging that Liu used Theta Labs to artificially inflate token prices through misrepresenting partnerships and undisclosed insider token sales. They also claimed that Liu would retaliate against employees who raised concerns.
Theta Labs is a blockchain company developing the Theta Network. The decentralised platform focuses on computing, storage, and media delivery. The network has two primary tokens: Theta, used for governance and staking, and Tfuel, for transaction fees and network services.
The explosive lawsuit has caused concern among investors and crypto market participants, with fears that it could impact the entire Theta ecosystem.
Liu's Pump and Dump Scheme
The plaintiffs highlighted a pattern of self-dealing linked to Theta Lab's crypto tokens and NFT marketplace. Liu's calculated pump-and-dump schemes repeatedly wiped out investor and employee value. The lawsuit, according to an attorney representing Kowal, is about holding Liu accountable for these actions.
The lawsuit further alleges that Liu's fraudulent schemes included 'generating false bids for non-fungible tokens,' some of which were linked to partnerships with high-profile celebrities such as Katy Perry.
During her employment at Theta, Berry claimed to have witnessed and reported multiple instances of fraudulent conduct and self-dealing by Theta executives, including schemes designed to inflate the Theta token's price and personally enrich Liu.
According to Berry's complaint, Liu's primary aim was to pump up the value of the token, including through 'fake or otherwise highly misleading partnerships with high-profile companies.'
Exaggerating the Nature of the Google Partnership
One of the most striking claims concerns Theta Labs' past claims about its relationship with Google. The lawsuit alleges that the company publicly misrepresented a cloud services arrangement as a strategic partnership. Partnerships with major firms like Google are generally regarded within the crypto industry as significant credibility markers.
Theta disclosed an arrangement with Google in May 2020. Berry alleged that this relationship was limited to a cloud services contract, whereby Theta agreed to spend $7 million (£5.1 million) on Google Cloud products. This, she claims, was presented as a strategic partnership, when in reality, it was a customer-supplier relationship.
The complaint states that this false characterisation was used to secure external validation and technological endorsement that, in fact, never existed, thereby misleading investors and the broader community about the true nature of the relationship.
Liu has yet to issue a public statement regarding the lawsuit. The next steps are likely to include court filings, potential motions to dismiss, and a discovery process where evidence will be exchanged.
The Need for Governance and Transparency
This lawsuit should serve as a wake-up call for decentralised companies. The consistent market manipulation in this unregulated space underscores the need for robust governance frameworks, transparent disclosure mechanisms, regular audits, whistleblower protections, real-time market monitoring, and the decentralisation of top leadership.
Disclaimer: Our digital media content is for informational purposes only and not investment advice. Please conduct your own analysis or seek professional advice before investing. Remember, investments are subject to market risks and past performance doesn't indicate future returns.
