Movement Labs Bankruptcy: How a Contract Everyone Knew Was Toxic Was Signed?

Written by: ChandlerZ, Foresight News

On July 15, Movement’s development company, Movement Labs (MVMT Labs), filed a Chapter 11 bankruptcy protection application with the U.S. Bankruptcy Court for the District of Delaware. Court documents show that the company’s book assets are only left with between $100,000 and $500,000, while liabilities total as much as $10 million, and there are up to 299 creditors.

At the top of the creditors list is Rushi Manche, a co-founder who was removed by the company last May. His unsecured claim exceeds $1.6 million and mainly comes from legal fees generated from cooperating with a U.S. Department of Justice grand jury investigation. To date, Rushi Manche still holds 34.25% equity in the company.

Movement is built on the Move programming language derived from Meta’s terminated Diem project, positioning itself as an Ethereum L2. In April 2024, the project completed a $38 million Series A round led by Polychain, receiving investment support from World Liberty Financial, which is associated with Trump. Reuters reported in January 2025 that the company is preparing a $100 million Series B at a $3 billion valuation.

On December 9, 2024, the MOVE token was listed for trading on Binance. But soon after the token went live, serious problems in the market-making segment were quickly exposed. A CoinDesk investigation revealed that an agreement signed between Movement and market maker Rentech gave the latter control over approximately 66 million MOVE tokens (about 5% of the total supply). After the token was listed, these holdings were rapidly and massively dumped, causing the MOVE price to plummet. Binance and Coinbase subsequently suspended MOVE trading.

Further investigation found undisclosed links between Rentech and the Chinese market maker Web3Port. Movement said that when the company signed the market-making agreement, it may have been misled about this relationship. After the scandal broke, the Movement Foundation launched token buybacks to stabilize the market, but the trust crisis could no longer be reversed.

What led to MVMT Labs’ bankruptcy? From listing to collapse, why did this batch of tokens concentrate in the hands of a single market maker? How did the ousted founder become the largest creditor? Everything is hidden within the chain of token transfers, the market-making agreements, and the struggle for company control.

A market-making agreement that everyone thinks is problematic

Contract documents obtained by CoinDesk reconstruct how this batch of tokens ended up in the market maker’s hands. On November 27, 2024, co-founder Rushi Manche forwarded a draft market-making agreement to the Movement Foundation via Telegram, asking that it be signed. The agreement proposed lending 66 million MOVE tokens to an entity named Rentech, with no prior public record.

In internal emails, the Foundation’s legal counsel, YK Pek, said this was “possibly the worst agreement I’ve ever seen,” and Foundation board member Marc Piano refused to sign. One clause in the agreement particularly raised concern: it stated that if the fully diluted valuation of MOVE exceeded $5 billion, Rentech could liquidate the tokens, with profits split 50/50 between Rentech and the Foundation. A crypto industry insider, Zaki Manian, who reviewed the contract, pointed out that this design effectively incentivized the market maker to pump the price first and then sell to retail investors.

The Foundation refused to sign the first version, but negotiations continued. Rentech later told the Foundation that it is a subsidiary of Web3Port and promised to provide $60 million in its own funds as collateral. On December 8, the revised agreement was signed. Some of the most extreme clauses were deleted, but the core structure remained unchanged: Web3Port could still borrow 5% of the MOVE supply and sell at a profit under specific conditions.

The identity structure behind the contract was the bigger problem. In this deal, Rentech played two roles: on one side, it acted as an agent for the Movement Foundation; on the other, it was an affiliate of Web3Port. The same intermediary sat on both sides of the negotiation table. Domain records show that the email domain of the contracting party, web3portrentech.io, was registered only on the day the contract was signed.

CoinDesk also found that as early as November 25, Web3Port had signed a separate agreement with Rentech. In that agreement, Rentech appeared in the name of Movement, and its terms were closer to the first version that the Foundation had rejected. The Foundation was unaware of this.

Rentech’s owner, Galen Law-Kun, is the business partner of Sam Thapaliya, the founder of the crypto protocol Zebec. Multiple people within Movement described Sam Thapaliya as the two founders’ long-time informal adviser; one employee referred to him as a “shadow co-founder.”

On the day MOVE was issued, Sam Thapaliya appeared at Movement’s San Francisco office. Telegram records show that Cooper Scanlon also commissioned him to help screen airdrop whitelist addresses. Sam Thapaliya denied having equity, tokens, or decision-making power in Movement.

After the scandal was exposed, Binance banned the implicated market maker’s account and froze its earnings. In May 2025, Coinbase paused MOVE trading. The Movement Foundation used recovered funds to initiate a $38 million token buyback.

How the deposed founder became the largest creditor

At the end of April 2025, Movement hired the blockchain security firm Groom Lake to conduct a third-party review of the market-making transactions. During the review, co-founder Rushi Manche was suspended on April 28 and formally terminated on May 7. In a Slack message to all employees, the other co-founder, Cooper Scanlon, said Movement was the victim in this matter.

But Rushi Manche’s story did not end with being fired.

He then sued MVMT Labs in the Delaware Court of Chancery, seeking to have the company prepay his legal fees incurred from cooperating with the government investigation, and he won. The U.S. Department of Justice is currently investigating the MOVE token issuance process. As a core decision-maker during the token launch period, Rushi Manche needed to hire lawyers to handle this investigation. The resulting legal fees formed the basis of his claim for more than $1.6 million.

This created an extremely unusual situation: the company went bankrupt due to the market-making scandal, yet the company’s obligation to pay the legal fees for handling that scandal (the deposed founder’s attorney fees) became the largest debt listed in the bankruptcy documents.

Rushi Manche currently still holds 34.25% equity in MVMT Labs, retaining the title of co-founder, but having no decision-making power over company operations. He has not publicly stated plans to sell his shares or take actions as a shareholder. Under Chapter 11 bankruptcy protection, the disposition of this equity will be one of the core issues in restructuring negotiations.

As the largest creditor, Rushi Manche has voting rights over the restructuring plan in the bankruptcy proceedings. As a holder of 34.25% equity, he also has a direct interest in the company’s residual value. Two identities—creditor and shareholder—exist within the same person. This kind of structure is not common in bankruptcy cases, and it may create complex game theory in restructuring negotiations.

Other names on the creditors list

In addition to Rushi Manche, the main creditors listed in the bankruptcy documents include:

Delaware Division of Corporations — about $459,000. This is the administrative expense generated by MVMT Labs’ registered property, and in bankruptcy it typically receives priority repayment.

Move Industries — amount undisclosed. This is the new entity that took over Movement’s core blockchain development work after the scandal. Move Industries is both the successor developer of MVMT Labs and a creditor; the ownership of intellectual property rights, brand usage rights, and historical financial dealings between the two entities need to be clarified one by one in the bankruptcy process.

Anchorage Digital — amount undisclosed. Anchorage is a U.S. federally chartered digital asset bank that provides custody services to institutional clients. Its appearance on the creditors list indicates that MVMT Labs previously used its custody or financial services.

Ottersec — amount undisclosed. Ottersec is a blockchain security audit firm that provides code audits for multiple major protocols; its claims likely stem from unpaid audit service fees.

Overall, MVMT Labs’ creditors span every link involved in operating a crypto project: legal fees, government registrations, outsourced development, asset custody, and security audits. With book assets of less than $500,000, its liabilities involve a full industry chain from legal matters to technology.

Move Industries: splitting up and pivoting

After the scandal, the core blockchain development work was transferred to a new entity, Move Industries, with Torab Torabi serving as CEO. In December 2025, the Foundation confirmed that Move Industries had become a major service provider for the network. After MVMT Labs applied for bankruptcy, Torab Torabi stated on X that the two entities operate independently: “Move Industries is operating normally. We continue to focus on building.”

But Move Industries itself is also one of MVMT Labs’ creditors. The ownership of intellectual property rights and historical financial dealings between the two entities must be clarified in the bankruptcy process.

In terms of direction, Move Industries made a complete pivot. In June 2026, the team announced it would abandon its Ethereum L2 positioning and instead transition to an independent Layer 1 blockchain, focusing on cross-border payments and stablecoin settlement. The new architecture runs an independent validator set, targeting a settlement time of less than 500 milliseconds. The team claims it has obtained licensed payment channel access in the United States, Canada, and the European Union, with partners including Circle (USDC), wallet service provider KAST and Sorted, and tokenization platform Oro. Torab Torabi set the target on the global cross-border remittance market of about $685 billion, especially emerging markets in middle- and low-income countries.

After the bankruptcy news was released, MOVE was quoted at around $0.01077, down more than 99% from its historical peak of about $1.20 in December 2024.