Fresh scandal rocks Movement Labs, facing lawsuit for $50M promised in shady deals

Movement Labs, the World Liberty Financial-backed crypto project, is facing heavy backlash and internal dissent as quiet promises of large token stakes made to early insiders have come to light. The previously undisclosed deals have raised fresh questions about who is truly running things behind closed doors. NEW: Movement Labs — the crypto startup backed by Trump’s World Liberty Financial — quietly promised early insiders access to up to 10% of its token supply, according to new documents obtained by @CoinDesk . None of it was disclosed to investors. pic.twitter.com/9kJxcCUuDf — Sam Kessler (@skesslr) May 15, 2025 Movement Labs gets caught up in under-the-table arrangements Before its token launch, Movement Labs reportedly committed large portions of MOVE’s supply to a spattering of early advisers, an action it kept hidden from investors that only surfaced via internal documents reviewed by CoinDesk, who broke the news. According to two business memos obtained by CoinDesk, Movement, which was founded in 2023 by two 20-year-old Vanderbilt dropouts, used these advisers as a crutch to gain a foothold in the crypto industry. However, Movement Labs has said the agreements, dated shortly after the project’s founding, were exploratory in nature and non-binding. Still, the existence of the agreements highlights the chaotic inner workings of Movement Labs, which is still licking its wounds after it came under fire last month for market-making deals that facilitated token dumping by insiders. The insider trading pissed many off, but the fallout from the revealed commitment to advisers is taking that anger to the next level. There are also many within the company playing the blame game, focusing on how Movement was steered into a predatory agreement with a Chinese market maker under terms that reportedly encouraged predatory selling. There is now a public rift between Movement Labs’ co-founders Rushi Manche, who was dismissed this month, and Cooper Scanlon, who is no longer the CEO but remains at the company. Manche claims he was merely the CTO leading the engineering team when they started Movement and as such, left most of the business decisions, including the contracts, to Cooper. “When priorities changed, our roles changed, but Cooper’s decisions in the early days heavily shaped the way the launch went,” Manche told CoinDesk in an interview. Movement Labs’ shadow advisers According to more than a dozen people familiar with Movement, including current and former employees who were granted anonymity so they could speak freely, the agreements concern Sam Thapaliya and Vinit Parekh, both of whom played significant behind-the-scenes roles in shaping the project during its early stages. Thapaliya, the CEO of Zebec Protocol, was reportedly loaned 5% of MOVE’s supply for marketing and market-making purposes, according to one of the agreements obtained by CoinDesk. Another agreement allocated Thapaliya 2.5% of the token’s total supply, worth more than $50 million at recent prices. Movement Labs is adamant that the signed agreements with Thapaliya were not binding, but Thapaliya claimed the agreements “were never voided.” A memorandum of understanding is normally considered non-binding, but the agreements also include provisions that make it impossible for them to be voided except with the consent of “both parties.” “I plan on pursuing legally to exercise my claim to retrieve 2.5% of tokens,” Thapaliya, who was tagged a “shadow founder” by employees of Movement Labs, has said. His name also came up in internal communications regarding Movement’s deal with Web3Port, a Chinese market maker that was later blamed for dumping $38 million in tokens after MOVE’s debut. Vinit Parekh is the second name that came up in the subject of shadow founders linked to Movement Labs. CoinDesk claims a 2023 agreement saw Movement Labs agree to give Vinit Parekh’s “Digital Incubation Group” $50,000 annually for every $1 million raised by Movement Labs. There was also another agreement that granted a separate Parekh entity control of 2.5% of the MOVE token supply. In exchange for his allocation, Parekh’s firm, Digital Incubation Group, was tasked with several things, including the development of strategy framework, tokenomics, and engaging in structuring team pre-product launch. Parekh’s agreements were also structured as memoranda of understanding with a termination clause requiring consent from both “parties.” However, Parekh and Movement Labs have tagged the agreements exploratory and claimed that funds never changed hands between either party. Nevertheless, sources close to Movement Labs have said that Parekh, a Microsoft product manager turned blockchain industry consultant, was a constant presence at Movement’s San Francisco office. However, unlike Thapaliya, Parekh has claimed the arrangement was out of love for the ecosystem and that no money has changed hands between his party or Movement Labs. The fallout from the scandal has now drawn attention to the widening rift between its co-founders, Manche and Scanlon. After an excerpt from one of the Thapaliya agreements leaked on X, Manche highlighted his former partner’s role in approving the deal by pointing to Scanlon’s signature on the memo. He also reposted a message questioning whether Movement Labs was “throwing [Manche] under the bus” while Scanlon “played innocent.” Manche was dismissed by Movement Labs earlier this month, while Scanlon remains with the organization even though he has had to step down as CEO. The scandal has damaged Movement’s reputation, costing it the rising star status it previously enjoyed. Coinbase has announced plans to suspend trading of the MOVE token on May 15, and the token’s price has fallen by 50% since then. KEY Difference Wire helps crypto brands break through and dominate headlines fast Source: https://www.cryptopolitan.com/movement-labs-lawsuit-for-50m-shady-deals/