Movement Labs Bankruptcy Exposes $10M Hole After Token Scandal
The collapse of Movement Labs into Chapter 11 bankruptcy, triggered by a token-dumping scandal, leaves up to $10 million in liabilities and highlights the ongoing governance risks in venture-backed crypto networks.
Movement Labs, the initial core developer behind the Movement blockchain, has filed for Chapter 11 bankruptcy in Delaware. The filing, posted on July 15, reveals a stark financial imbalance with assets of just $100,001 to $500,000 against liabilities of up to $10 million. The company listed up to 299 creditors in the proceeding.
The largest unsecured claim belongs to co-founder Rushikesh “Rushi” Manche, who is owed more than $1.6 million. Manche was terminated following an internal investigation but still retains a 34.25% equity stake in the bankrupt entity. He separately sued the company in Delaware Chancery Court and won the advancement of legal fees related to a DOJ grand jury investigation into the token launch.
The bankruptcy caps a rapid downfall for a company that raised $38 million in a Series A round led by Polychain. The unraveling began with the December 2024 launch of the MOVE token, which was derailed by a questionable market-making agreement. An obscure entity called Rentech received 66 million tokens, roughly 5% of the total supply, and rapidly dumped them onto the market.
This sudden sell-off triggered a severe price crash that forced major exchanges Binance and Coinbase to suspend trading of the token. The fallout fundamentally damaged the ecosystem's market value and left the original development company insolvent.
In the wake of the scandal, the project's underlying technology and operations were transferred to a separate entity, Move Industries, led by Torab Torabi. Move Industries is not part of the bankruptcy filing, representing a common maneuver in the crypto sector to insulate ongoing development from legacy corporate liabilities.
Other notable claimants in the case include the Delaware Division of Corporations, which is allegedly owed $459,000, alongside institutional creditors like Anchorage Digital and auditing firm Ottersec. The Movement Foundation has since attempted to stabilize the network through token buybacks, while the project pivoted from an Ethereum Layer 2 to a sovereign Layer 1 focused on emerging market financial services. For investors and service providers, the collapse underscores the severe counterparty risks embedded in opaque crypto market-making structures.
