Movement Labs files for Chapter 11 bankruptcy due to $38 million MOVE token scandal

MVMT Labs filed for Chapter 11 bankruptcy with liabilities of up to $10 million and assets of less than $500,000.

Former co-founder Rushi Manche holds the largest unsecured claim, worth more than $1.6 million.

The MOVE token crisis began with a controversial market-making agreement involving the sale of 66 million tokens.

Move Industries remains independent from MVMT Labs, and the development of the Movement blockchain has not been affected by bankruptcy.

MVMT Labs, the original developer of the Movement blockchain, has its financial situation deteriorated and filed for bankruptcy protection.

MVMT Labs, as the original developer of the Movement blockchain, has filed for Chapter 11 bankruptcy protection after a token issuance dispute damaged its financial and corporate structure. The July 15 filing puts the company under Delaware bankruptcy protection while creditors, former executives and service providers are filing claims for its remaining assets.

Court records show that the company's assets are estimated to be between $100,000 and $500,000, while its liabilities are between $1 million and $10 million. The filing lists 200 to 999 creditors, underscoring the debt pressures now facing the company, once advertised as a major crypto infrastructure developer.

Small business bankruptcy filing reveals deep debt and creditor pressure

The case, numbered 26-11113, was assigned to Thomas M. of the U.S. Bankruptcy Court of Delaware. Judge Horan heard. MVMT Labs chose the Small Business Bankruptcy Procedure, a simplified reorganization process for qualified small businesses designed to seek court-approved repayment or reorganization plans. Under this framework, the debtor still retains control, while the trustee supervises negotiations and financial information disclosure. Jeffrey Schwendeman has been appointed trustee and the company has applied for approval of post-bankruptcy financing. A creditor meeting is scheduled for August 20, and most proofs of claims must be filed by September 14. The company's reorganization plan needs to be submitted by October 13, which sets a timetable for determining whether it can be restructured or liquidate.

Former co-founder holds the largest claim, and other creditors have filed multiple claims

Former co-founder Rushikesh "Rushi" Manche holds the largest unsecured claim on the list, in excess of US$1.6 million. He also retained a 34.25% ownership stake in MVMT Labs. Other creditors include the Delaware Department of Companies, Move Industries, Anchorage Digital and blockchain security company OtterSec. Their claims reflect legal, operational and company-level obligations. In March, the Delaware Chancery Court ruled that Manche was entitled to an advance on legal fees. The fees are related to a federal investigation related to the company and activities surrounding the MOVE token offering.

Controversial MOVE market-making deal triggers crisis

The controversy began after the issuance of MOVE tokens in December 2024. A market-making agreement allows Rentech to receive 66 million tokens, or about 5% of the total supply. Binance later said the market maker sold the allocations with little corresponding buying activity. Before Binance removed the account for misconduct, those sales generated approximately $38 million in USDT. The Movement Network Foundation said it had no prior knowledge and later promised to use the recovered proceeds to a $38 million MOVE token repurchase program. However, an investigation found internal concerns about the protocol's structure and Rentech's relationship with the Web3Port. Rentech denied wrongdoing and refuted allegations of false statements. This cryptocurrency storm quickly spread beyond the token market. Binance suspended MOVE trading in May 2025, while Movement commissioned an external agency to investigate the arrangement. Subsequently, MVMT Labs dismissed Manche and development responsibilities were transferred from the bankrupt company. Move Industries, formed by former Movement personnel, now handles most of the network's work.

Important clarification: Move Industries operates independently and is not affected by bankruptcy

CEO Torab Torabi stated that Move Industries remains legally independent and continues to operate normally. Therefore, this bankruptcy will not automatically place blockchain or its current developers under court protection. The application now shifts the focus to creditor claims, the financial calendar and an October restructuring plan. The documents will reveal whether Movement Labs can preserve assets or must liquidate.