Movement Labs, the developer of the Ethereum Layer 2 blockchain Movement, officially filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of Delaware on July 15, 2026. The company is pursuing Subchapter V, a specialized debt restructuring option designed for small businesses. This legal pathway allows Movement Labs’ business operations to continue as usual, but under direct court supervision.
Their initial motions have been granted by the bankruptcy judge. The court approved the company’s interim requests to continue managing its bank accounts and maintain its existing cash management system. The court also authorized access to debtor-in-possession financing to ensure transitional operational costs remain covered. Meanwhile, creditors holding claims against Movement Labs have been given until September 14, 2026, to submit their claims.
Price Collapse Began From Within
The sequence of legal troubles began with a closed-door deal that culminated in massive liquidations on the open market. In May 2025, company co-founder Rushi Manche was suspended from his role. This disciplinary action followed the disclosure of a transaction with market maker Web3Port. Under the agreement, Web3Port received an allocation of 66 million MOVE tokens, representing 5% of the total token supply.
The situation escalated into a crisis when Web3Port liquidated the large holding onto the retail market. The token sell-off immediately created $38 million in sell pressure and triggered an independent investigation into the project’s governance. The fallout quickly spread to major crypto exchanges. Coinbase responded by suspending all MOVE trading, stating that the digital asset no longer met the platform’s listing standards.
The series of blows from internal maneuvers devastated the asset’s price. Over the past year, the value of the MOVE token has plunged more than 94%. The token, which once attracted strong investor interest, now trades at around $0.01.
Ecosystem Developer Boundaries
Amid the scrutiny surrounding the bankruptcy proceedings, Move Industries, the new entity overseeing the ecosystem, immediately drew a clear line. Move Industries CEO Torab Torabi issued a statement emphasizing that his company is an entirely separate and distinct entity from Movement Labs.
Torabi confirmed that Move Industries took over all Movement blockchain ecosystem development responsibilities from Movement Labs starting in December 2025. Under the new management structure, mainnet operations are reportedly running as usual and remain entirely unaffected by the previous developer’s debts.
The legal separation between the initial developer and the new management highlights layered risks within the crypto sector. For retail investors, the structural boundary drawn late last year serves as the sole safeguard ensuring that past token distribution scandals do not compromise core network operations today.
Source: Cointelegraph.
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Disclaimer: This article is for informational and educational purposes only, not financial advice. Cryptocurrency assets are highly volatile and carry significant risk. Always do your own research (DYOR) and never invest more than you can afford to lose.
