Movement Labs, a Layer 2 blockchain startup building infrastructure for Move-based applications, has found itself at the center of a growing controversy. Fresh off a $38 million raise in March, the project is now under scrutiny after a massive token selloff led to the suspension of co-founder Rushi Manche. The scandal has raised questions about internal governance, transparency, and the role of market makers in token launches. Here are five key things to understand.

1. Market-maker fallout

The trouble began when blockchain analysts discovered unusual on-chain activity involving millions of dollars’ worth of $MOVE tokens being sold shortly after the token launched. These wallets were later linked to Web3Port, a market-making firm affiliated with Movement Labs. According to reports by CoinDesk and Cointelegraph, insiders—including Rushi Manche—may have facilitated deals with Web3Port that lacked clear oversight and violated internal agreements.

2. Co-founder suspended

On April 30, Movement Labs officially suspended Rushi Manche, citing “breaches of trust and protocol” stemming from his role in negotiating and executing the market-maker contract. In a public statement, the team emphasized that the decision was made to “preserve the integrity of the project.” Manche has publicly denied wrongdoing, saying the agreement was pre-approved by advisors—but internal documents suggest the arrangement lacked transparency and formal consensus.

3. Secret side deals

According to CoinDesk’s deep-dive investigation, the scandal revealed a tangle of shadow advisors, off-the-books agreements, and undisclosed token allocations. These informal deals appear to have given early actors the ability to offload large amounts of $MOVE tokens almost immediately after launch, undermining the trust of the community and investors. The lack of documented governance raised alarms across the crypto space.

4. Coinbase delisting

In a blow to the project’s legitimacy, Coinbase suspended trading of the $MOVE token following the revelations. The token plunged more than 20% in value after the announcement. While no formal allegations of fraud have been made, the optics around internal mismanagement and early token dumping have led exchanges and users to distance themselves from the project.

5. A cautionary tale

Movement Labs had positioned itself as a next-gen Layer 2 built on the secure and developer-friendly Move language. Now, the scandal has become a case study in early-stage governance failure. Despite its decentralized branding, the project’s control remained concentrated in the hands of a few insiders—a dynamic that ultimately left it vulnerable to opaque deals and community backlash.

While Movement Labs has pledged to reform its governance and improve transparency, the damage has been done. The incident has sparked wider conversations about the need for better checks and balances in crypto startups—and how quickly community trust can unravel when founders overstep.