Raised 38 million, 19 months later the total assets were not enough to pay the $1.6 million legal fees of the dismissed founder

By: ChandlerZ, Foresight News

On July 15, the development company behind Movement, Movement Labs (MVMT Labs), filed for Chapter 11 bankruptcy protection in the bankruptcy court of Delaware in the United States. Court documents show that the company's book assets are only between $100,000 and $500,000, with liabilities as high as $10 million and a maximum of 299 creditors.

At the top of the creditor list is Rushi Manche, the co-founder who was dismissed by the company in May of last year, with unsecured claims exceeding $1.6 million, primarily arising from legal fees incurred while cooperating with the investigation of the U.S. Department of Justice grand jury. Rushi Manche still holds a 34.25% equity stake in the company.

Movement is built on the Move programming language derived from the now-terminated Diem project by Meta, and is positioned as an Ethereum Layer 2. The project completed a $38 million Series A funding round led by Polychain in April 2024, gaining investment support from World Liberty Financial, a company under Trump. Reuters reported in January 2025 that the company is preparing for a Series B round aiming for $100 million at a valuation of $3 billion.

On December 9, 2024, the MOVE token was launched and traded on Binance, but shortly after the token went live, severe issues in the market-making process were quickly exposed. A CoinDesk investigation revealed that the agreement between Movement and the market maker Rentech allowed the latter to control approximately 66 million MOVE tokens (about 5% of total supply). After the token was launched, this batch of tokens was rapidly sold in large quantities, causing the MOVE price to plummet. Binance and Coinbase subsequently suspended MOVE trading.

Further investigation found undisclosed connections between Rentech and the Chinese market maker Web3Port. Movement indicated that they may have been misled about this relationship when signing the market-making agreement. After the scandal broke, the Movement Foundation initiated a token buyback to stabilize the market, but the trust crisis was already irreversible.

What led to MVMT Labs' bankruptcy? From launch to collapse, why did this batch of tokens end up concentrated in the hands of one market maker? How did the dismissed founder become the largest creditor? Everything is hidden within the chain of token circulation, market-making agreements, and the struggle for control of the company.

A Market-Making Agreement Everyone Thought Was Problematic

Contract documents obtained by CoinDesk reveal how this batch of tokens fell into the hands of market makers. On November 27, 2024, co-founder Rushi Manche forwarded a draft market-making agreement to the Movement Foundation via Telegram, requesting signatures. The agreement proposed lending 66 million MOVE tokens to an entity named Rentech, with no prior public records.

Foundation legal counsel YK Pek described it in an internal email as "possibly the worst agreement I've ever seen," and Foundation director Marc Piano refused to sign. One particular clause in the agreement raised alarm, stating that if the fully diluted valuation of MOVE exceeded $5 billion, Rentech could liquidate the tokens, splitting profits with the Foundation 50-50. Crypto industry expert Zaki Manian noted that this design effectively incentivized market makers to first inflate prices and then sell to retail investors.

The Foundation rejected the first version, but negotiations continued. Rentech later informed the Foundation that it was a subsidiary of Web3Port and promised to provide $60 million in its own funds as collateral. On December 8, a revised agreement was signed, deleting some extreme terms, but the core structure remained unchanged, allowing Web3Port to borrow 5% of the MOVE supply and sell it for profit under certain conditions.

The identity structure behind the contract is a larger issue; Rentech played two roles in this transaction, acting as both the agent for the Movement Foundation and an affiliate of Web3Port, with the same intermediary sitting on both sides of the negotiation table. Domain records show that the signing party's email domain web3portrentech.io was only registered on the day the contract was signed.

CoinDesk also discovered that as early as November 25, Web3Port had signed a separate agreement with Rentech, where Rentech appeared in the name of Movement, with terms closer to the first version that had been vetoed by the Foundation. The Foundation was unaware of this.

Galen Law-Kun, the owner of Rentech, is a business partner of Sam Thapaliya, the founder of the crypto protocol Zebec. Several insiders from Movement described Sam Thapaliya as a long-term informal advisor to the two founders, with one employee calling him a "shadow co-founder."

On the day of the MOVE token issuance, Sam Thapaliya appeared at Movement's San Francisco office, and Telegram records show that Cooper Scanlon had previously entrusted him to help screen addresses for the airdrop whitelist. Sam Thapaliya denied having any equity, tokens, or decision-making power in Movement.

After the scandal broke, Binance banned accounts of the involved market makers and frozen their earnings, while Coinbase suspended MOVE trading in May 2025. The Movement Foundation initiated a $38 million token buyback using recovered funds.

How the Dismissed Founder Became the Largest Creditor

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

However, Rushi Manche's story did not end with his dismissal.

He subsequently sued MVMT Labs in Delaware Chancery Court, demanding that the company prepay the legal fees he incurred while cooperating with the government investigation, and he won. The U.S. Department of Justice is currently conducting a grand jury investigation into the MOVE token issuance process, and Rushi Manche, as a key decision-maker during the token launch period, needs to hire a lawyer to address this investigation. The resulting legal fees constitute the main part of his claim of over $1.6 million.

This created an extremely unique situation where the company went bankrupt due to the market maker scandal, and the legal fee obligations incurred by the company to handle this scandal (paying the legal fees of the dismissed founder), in turn became the largest debt in the bankruptcy documents.

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

As the largest creditor, Rushi Manche has the right to vote on the restructuring plan in the bankruptcy proceedings; as a holder of 34.25% equity, he also has a direct interest in the remaining value of the company. The dual role of creditor and shareholder existing in one person is not common in bankruptcy cases and may bring complex gaming dynamics to the restructuring negotiations.

Other Names on the Creditor List

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

The Delaware Division of Corporations, approximately $459,000, which are administrative fees incurred from MVMT Labs’ registration that usually enjoys priority repayment in bankruptcy.

Move Industries, amount undisclosed. This is a new entity that took over the core blockchain development work of Movement following the scandal. Move Industries is both the successor developer of MVMT Labs and a creditor, with the ownership of intellectual property, brand usage rights, and historical financial transactions between the two entities needing to be clarified one by one in the bankruptcy proceedings.

Anchorage Digital, amount undisclosed. Anchorage is a federally chartered digital asset bank in the United States that provides custody services for institutional clients, appearing on the creditor list indicates that MVMT Labs had used its custody or financial services.

Ottersec, amount undisclosed. Ottersec is a blockchain security audit firm that provides code audits for several mainstream protocols, and its claims likely arise from unpaid audit service fees.

Overall, MVMT Labs’ creditor composition covers various aspects of operating a crypto project, including legal fees, government registrations, outsourced development, asset custody, and security audits. With book assets under $500,000 but liabilities covering the full industrial chain from legal to technical.

Move Industries: Cutting and Transforming

The core blockchain development work has shifted to the new entity Move Industries after the scandal, with Torab Torabi serving as CEO. The Foundation confirmed in December 2025 that Move Industries has become the primary service provider for the network. After MVMT Labs filed for bankruptcy, Torab Torabi stated on X that the two entities operate independently: "Move Industries is operating normally. We continue to focus on building."

However, Move Industries itself is also one of MVMT Labs’ creditors. The ownership of intellectual property and historical financial transactions between the two entities needs to be clarified in the bankruptcy proceedings.

Directionally, Move Industries underwent a complete transformation. In June 2026, the team announced it would abandon its Ethereum L2 positioning and shift to an independent Layer 1 blockchain, focusing on cross-border payments and stablecoin settlements. The new architecture operates an independent validator set, targeting settlement times of under 500 milliseconds. The team claims to have secured licensed payment channel access in the U.S., Canada, and the EU, with partners including Circle (USDC), wallet service providers KAST and Sorted, and tokenization platform Oro. Torab Torabi has set his sights on the global cross-border remittance market of about $685 billion, particularly in the emerging markets of low-to-middle-income countries.

After the bankruptcy news was announced, MOVE's price was about $0.01077, down more than 99% from its historical high of about $1.20 in December 2024.