Movement Labs files for bankruptcy, Movement Industrial and Foundation may emerge as biggest winners

Original｜Odaily Planet Daily (@OdailyChina)

Author｜Wenser (@wenser 2010 )

Last evening, news that "Movement developer Movement Labs files for bankruptcy protection" caused an uproar in the crypto circle. No one expected that this "star L2 project," which had previously sought a $100 million funding round at a $3 billion valuation, would go bankrupt.

However, as more details emerged, the truth finally surfaced: the entity filing for bankruptcy was only the former development company, Movement Labs, which has no impact on the Movement network; the Movement network was already taken over by Move Industries in May 2025 and has transitioned into an L1 network focused on cross-border payments and stablecoin settlement. Move Industries CEO Torab alsoconfirmed this in a post.

Just when we thought this was merely a cliché case of "legacy issues from developer team rotation," a post revealing the true bankruptcy process of Movement Labs offered a different perspective: This is not a simple bankruptcy filing but a meticulously planned escape act.

Unraveling the Mystery of the Movement Labs Bankruptcy: A Former Developer Transforms into a Bankruptcy Shell

According to a tweet from Thomas Braziel, partner at bankruptcy restructuring firm 117Partner (@Bkclaims), Movement Labs' bankruptcy filing appears to be a premeditated "shell game": Before filing for bankruptcy, they had already transferred the company's operational business, intellectual property, contracts, token rights, and employees elsewhere, leaving the original company with only $60,000 in cash and litigation claims.

In other words, this is not a normal Chapter 11 filing, but a strategic move to sever risks and shield Move Industries and the Movement Foundation from legal disputes. These two entities are the recipients of the assets previously held by Movement Labs, the original developer of the Movement network.

In the bankruptcy protection filing documents submitted by Movement Labs, we find more evidence supporting this view:

• In mid-July 2026, the company filed for Chapter 11 (Subchapter V, a streamlined process for small businesses) in the U.S. Bankruptcy Court for the District of Delaware. Company assets are between $100,000 and $500,000, liabilities up to $10 million, and creditors are ≤ 299.
• According to the prior "Fenix Project Agreement," Movement Labs transferred its remaining intellectual property and key contracts to the Movement Foundation, relinquished its MOVE token issuance rights, and agreed to terminate its business operations.
• Movement Labs transferred its core team to Move Industries (the current developer of the Movement network) for a price of $1.2 million.
• As of the bankruptcy filing date, Movement Labs has no operating assets, no active business, and no full-time employees; it only has approximately $60,000 in cash; the company is still involved in litigation claims and residual rights from contracts.
• MNF DIP SPV Ltd., a Cayman Islands subsidiary of the Movement Foundation, is providing Movement Labs with a financing package of up to $5.7 million for debt repayment and an exit plan. This, however, comes with a stringent set of requirements, including but not limited to: court approval and adherence to the Fenix Project Agreement, the bankruptcy trustee needing the company's approval, and a prohibition on investigating or suing the Movement Foundation, Movement Ltd., the DIP lender, and numerous affiliates. Notably, this protection extends to former Movement co-founder Cooper Scanlon, Polychain Capital's Chief Legal Officer Ruby Sekhon, and all officers, directors, and employees of Move Industries who were transferred (including CEO and lead Torab Arya/Torab Torabi). Former co-founder Rushi Manche, who was dismissed due to the market manipulation and token insider trading scandal, and market maker institutions are not covered by this clause.

Thus, Movement Labs became the scapegoat bearing all the burdens, while the Movement Foundation (and its Cayman Islands subsidiary) and Move Industries instead became the "benefactors" funding the creditor litigation, seizing the initiative to prioritize compensation and approve the trustee's bankruptcy plan. Whether Rushi Manche, the former co-founder acting as a creditor in the bankruptcy, can get compensation for the $1.6 million in legal and litigation fees incurred from prior lawsuits depends on the goodwill of the Movement Foundation's subsidiary. Currently, this subsidiary has temporarily approved $750,000 for this bankruptcy protection process.

Here, it's necessary to explain the difference between Chapter 11 of the U.S. Bankruptcy Code and its Subchapter V.

According to public information, Chapter 11 is suited for mid-to-large enterprises, requiring a creditors' committee, involves complex procedures and a longer timeline, with correspondingly higher execution costs. Subchapter V of Chapter 11, which Movement Labs opted for, is designed for small businesses (such as Movement Labs, a "small business" with no full-time employees). The bankruptcy process is streamlined for speed and simplicity, aiming to avoid potential scrutiny from a creditors' committee.

According to the documents, the objection deadline for the final DIP financing order is 4:00 PM ET on August 20th, and the final bankruptcy review hearing is scheduled for 11:00 AM ET on August 27th, presided over by Judge Thomas M. Horan.

Behind the Movement Labs Bankruptcy: MOVE Token Under DOJ Investigation, Co-founders Go Separate Ways

In April last year, Movement faced the "66 million MOVE token sell-off incident." At the time, this sell-off, worth $38 million, was exposed by an insider contract, drawing widespread criticism towards MOVE's market maker, Rentech, and its parent company, Web3Port.

Ultimately, the matter subsided after Binance froze the market maker's accounts and profits, Coinbase suspended MOVE trading, the Movement Foundation conducted a $38 million token buyback using recovered funds, and co-founder Rushi Manche was fired by the team. However, the U.S. Department of Justice (DOJ) is still conducting a grand jury investigation into the matter and the MOVE token issuance, with Rushi being one of the parties involved in the response.

Currently, Rushi Manche still holds 34.25% equity in Movement Labs and retains the co-founder title, but has no business decision-making power. The token sell-off incident and revelations that "Movement Labs secretly promised up to 10% of token allocation to two advisors" were the direct catalysts pushing Movement Labs towards filing for bankruptcy protection.

Incidentally, it's worth noting that Cooper, the other co-founder of Movement Labs, is also not entirely clean.

Earlier, Thapaliya, a participant behind the MOVE token airdrop, alleged that Cooper insisted on allocating the maximum possible MOVE token share to a specific set of 75,000 wallets. Using on-chain heatmaps, Thapaliya pointed out that these wallets were almost the exclusive addresses that claimed and could bundle-sell over 60 million MOVE tokens during the December 9, 2024 airdrop. Currently, Cooper has stepped down from the Movement ecosystem's decision-making layer and previously handed leadership to Move Industries CEO Torab, seemingly signaling a semi-retirement.

As things stand, aside from the DOJ investigation and lawsuits, Rushi's development within the crypto industry hasn't been significantly affected.

In December last year, Rushi announced the formation of Nyx Group, planning to invest up to $100 million to support crypto token projects. The group aims to provide liquidity and comprehensive operational support for projects preparing for token launches, including community building, financial management, and compliance guidance. It appears he is pursuing his "second act" in his career.

Whether Movement Labs can successfully shake off regulatory scrutiny and the fallout from the token sell-off and market-making scandal through this escape act remains to be seen. The upcoming bankruptcy hearing may provide the final answer.