Movement Labs files for bankruptcy amid MOVE token scandal
Movement Labs has sought Chapter 11 protection after a disastrous market-making deal wiped out over 90% of its token's value, highlighting governance risks in layer-2 crypto projects.
Movement Labs, the developer behind the Movement Ethereum layer-2 blockchain, filed for Chapter 11 bankruptcy protection in the US Bankruptcy Court for the District of Delaware on July 15. The company utilized Subchapter V, a streamlined reorganization process designed for qualifying small businesses, allowing it to maintain daily operations under strict court supervision. On Monday, a judge approved interim measures permitting the firm to access debtor-in-possession financing and retain control of its bank accounts.
The collapse caps a months-long crisis triggered by a controversial market-making agreement. In May 2025, the company suspended co-founder Rushi Manche following his involvement in a deal with Web3Port. The market maker received 66 million MOVE tokens, representing 5% of the total supply, which it subsequently sold off.
That liquidation created an estimated $38 million in downward price pressure on the MOVE token. The fallout prompted an independent investigation and led Coinbase to suspend trading of the asset after concluding it no longer met the exchange's listing standards. Over the past year, the token's value has plummeted by more than 94%, trading at roughly $0.01.
The bankruptcy filing does not encompass the broader Movement ecosystem. Move Industries CEO Torab Torabi stated on X that the Chapter 11 case applies exclusively to Movement Labs. Move Industries, which assumed control of the network's development and operations in December 2025, continues to function normally.
For creditors, the restructuring process is now formally underway. The court has set a September 14 deadline for claims to be filed against Movement Labs. The utilization of Subchapter V indicates management intends to propose a fast-tracked reorganization plan rather than pursue an outright liquidation.
The case underscores the structural vulnerabilities inherent in crypto token launches, particularly the dangers of opaque market-making arrangements. For market participants, the failure of Movement Labs illustrates how centralized token distributions can rapidly destroy value, even as the underlying network technology transitions to new corporate ownership.
