Movement Labs files for Chapter 11 after MOVE token scandal as sister firm Move Industries presses on
Movement Labs has entered Chapter 11 bankruptcy protection after more than a year of turmoil surrounding its MOVE token, drawing a sharp line between the collapsed research outfit and the separate operating company, Move Industries, which says it remains fully functional.
According to a petition filed on July 15 in the U.S. Bankruptcy Court for the District of Delaware, Movement Labs – the original research and development company behind the Movement blockchain – reported between $100,001 and $500,000 in assets, while listing potential liabilities of up to $10 million. The filing also notes as many as 299 creditors, underscoring the breadth of the fallout from the project’s token launch.
The largest unsecured claim is tied to former co-founder and chief executive Rushikesh “Rushi” Manche, who is listed as owed more than $1.6 million. Court documents also show the Delaware Division of Corporations, Move Industries, Anchorage Digital, and security auditor OtterSec among the creditors. The Delaware state agency is reportedly owed about $459,000 in fees and penalties.
Manche was removed from his role at Movement Labs in May 2025 but still owns roughly 34.25% of the company’s equity, giving him a significant stake in the remains of the business despite his ouster. Before the bankruptcy, he sued Movement Labs in the Delaware Court of Chancery and obtained reimbursement for legal costs related to a U.S. Department of Justice grand jury investigation into the launch of MOVE.
Movement Labs originally functioned as the core R&D arm for Movement Network, a blockchain project that first appeared as an Ethereum layer-2 solution built with the Move programming language. Move, created inside Meta for its now-abandoned Libra and Diem digital currency efforts, was intended to bring more secure and flexible smart contract capabilities to public blockchains.
Prior to the token scandal, Movement Labs had become a high-profile venture-backed startup. It secured $38 million in a Series A financing round led by Polychain Capital, and by January 2025 it was reported to be in late-stage talks for an additional $100 million at a proposed $3 billion valuation. At that point, the project was still being framed as one of the most promising attempts to commercialize the Move language at scale.
The turning point came after the MOVE token debuted on exchanges in December 2024. An investigation revealed that under a market-making agreement, 66 million MOVE tokens – around 5% of the total supply – were transferred to a relatively obscure intermediary called Rentech. Internal documents indicated that wallets associated with market maker Web3Port sold those tokens almost immediately after the listing, allegedly realizing roughly $38 million in proceeds.
The rapid offloading of such a large allocation placed a significant portion of the freely tradable MOVE supply under a single counterparty’s control and coincided with a sharp price collapse. Observers raised concerns that this setup may have created an environment in which insiders or associated parties could benefit at the expense of retail traders who bought in after the market opened.
Questions also arose over the structure of the market-making deal itself. Rentech appeared in contractual documents both as an agent for the Movement Network Foundation and as an affiliate of Web3Port, blurring lines around whose interests it was actually representing. Rentech rejected any claims that it had misrepresented its role, while Movement co-founder Cooper Scanlon told staff that the team was investigating whether it had been misled during negotiations.
Industry participants who reviewed the documentation argued that the arrangement effectively incentivized boosting MOVE’s valuation in the early days and then unloading tokens onto the public. One prominent crypto founder characterized the mere existence of such terms in formal agreements as highly problematic, warning that it invited behavior bordering on abusive toward retail market participants.
The controversy triggered enforcement action at the exchange level. Binance banned the market-making account connected to the MOVE trades for what it described as misconduct and froze profits tied to the token sales. In response, the Movement Network Foundation announced a $38 million MOVE repurchase initiative funded with the recovered proceeds and brought in external firm Groom Lake to investigate the transaction structures and governance failures that had allowed the situation to develop.
Internal power struggles followed. Movement Labs dismissed Manche, alleging he had approved or signed agreements that had not been properly disclosed to the rest of the leadership team. At roughly the same time, the project’s technical heart was effectively relocated: core development duties were transferred to a newly incorporated entity, Move Industries, under the leadership of chief executive Torab Torabi.
Trading halts compounded the reputational and financial damage. Reports indicated that both Binance and Coinbase suspended trading of MOVE after the launch scandal, choking off liquidity and further undermining investor confidence. Around the time bankruptcy proceedings for Movement Labs became public, MOVE was trading near $0.0108, barely moving on the news and showing a gain of less than 1%, suggesting that the market had already priced in much of the negative sentiment.
Move Industries, which inherited the main operational responsibilities for the network, has distanced itself from the bankruptcy. The company has stated that it is not part of the Chapter 11 case and continues to run the blockchain’s day-to-day functions as a separate legal entity. Torabi has publicly emphasized that Movement Labs and Move Industries are distinct companies with different roles, asserting that Move Industries is “operating normally” and focused on product development rather than the legacy legal disputes.
In December 2025, the Movement Network Foundation confirmed that Move Industries had formally become its primary service provider, taking over the major operational, development, and ecosystem-building tasks. Under this model, the foundation serves as an independent steward of the protocol and its governance, while Move Industries acts as the main commercial and technical executor.
Following this corporate realignment, Move Industries re-architected the project’s technology stack, transitioning Movement from an Ethereum-based layer-2 rollup into a standalone layer-1 blockchain. The revamped network has been repositioned as infrastructure for stablecoin payments, remittances, and cross-border transfers, with an explicit focus on emerging markets where high fees and slow settlement continue to burden traditional payment rails.
The collapse of Movement Labs therefore sits in stark contrast to the project’s original ambitions. The company was once held up as an example of how the Move programming language could jump from an internal corporate experiment to a foundation for open, public financial infrastructure. Instead, its bankruptcy now serves as a case study in how opaque token allocation deals, misaligned incentives, and weak governance can derail otherwise technically promising ventures.
From a legal standpoint, the Chapter 11 process gives Movement Labs a chance to reorganize its remaining obligations rather than immediately liquidate. Creditors, from institutional partners to former executives, will compete for recovery from a relatively small asset pool. The presence of a large equity holder like Manche, who is simultaneously a significant creditor and a contentious former insider, complicates the negotiations and could influence the direction of any restructuring plan.
For MOVE token holders and early supporters, the practical consequences are more nuanced. While the network’s ongoing operations now rest with Move Industries and the Movement Network Foundation, the collapse of the original R&D company raises doubts over long-term funding, ecosystem grants, and the viability of prior commitments. Many early-stage token projects rely heavily on their founding labs to drive partnerships, developer relations, and marketing – all areas that may now need to be rebuilt under the Move Industries banner.
The episode also feeds into a broader debate about token launch practices in the crypto industry. The MOVE case highlights how market-making contracts, if poorly designed or insufficiently transparent, can distort price discovery and undermine trust. Allocating a large slice of circulating supply to a small set of intermediaries, with incentives to quickly sell, can effectively create conditions akin to a structured dump on retail participants, even if it technically complies with existing rules.
Regulators and policymakers are likely to view Movement Labs’ downfall as further evidence that token distribution, market-making arrangements, and the role of foundations and affiliated trading firms require closer scrutiny. While not every token launch with aggressive market-making will lead to bankruptcy, the pattern of concentrated allocations followed by rapid selling and steep price declines is now familiar enough to attract official attention.
On the industry side, the scandal reinforces the need for clear disclosures, independent audits, and robust internal controls before a token goes live. Projects that aspire to institutional credibility increasingly recognize that they must treat market structure design – who gets tokens, on what timeline, and under what restrictions – as seriously as they treat protocol engineering. The reputational damage from a poorly handled launch can be irreversible, no matter how sound the underlying technology.
Meanwhile, Move Industries faces the difficult task of proving that it is more than just a rebranded continuation of the past. To regain trust, it will likely need to demonstrate that its governance is genuinely independent from the figures and entities embroiled in the MOVE scandal, adopt stricter compliance standards, and show tangible traction in the payments and remittances use cases it now targets.
For developers and builders interested in the Move language, the situation is equally mixed. On one hand, the bankruptcy of a major early adopter may dampen enthusiasm and raise concerns about ecosystem stability. On the other, it underscores the importance of diversifying the Move ecosystem across multiple independent teams and chains so that the failure of one corporate sponsor does not define the fate of the entire technology stack.
Movement Labs thus becomes another prominent example of a well-funded crypto startup that faltered not primarily because of technical shortcomings, but due to governance disputes, questionable token economics, and breakdowns in trust. Whether Move Industries and the Movement Network Foundation can carve out a viable future from the remnants – and convince users, developers, and institutional partners that this time is different – remains one of the key open questions following the bankruptcy.