Crypto startup Movement Labs promised advisers large token stakes, sparking chaos and public rifts

From Yahoo Finance: 2025-05-15 10:24:00

Movement Labs, the crypto startup backed by Donald Trump’s World Liberty Financial, quietly promised large stakes of its token to early insiders, raising fresh questions about who holds power. The scandal-plagued company committed portions of its supply to advisers, sparking chaos and public rifts among co-founders.

Two business memos reveal Movement Labs relied heavily on advisers to gain traction in the crypto industry. The agreements, dated after the project’s founding, were exploratory and non-binding. The internal documents show insider market-making deals enabled token dumping, sparking finger-pointing within the company.

The fallout from insider market-making deals led to a public rift between co-founders and allegations of predatory agreements with a Chinese market maker. Movement Labs was criticized for incentivizing predatory selling, leading to tension within the company and questioning of decision-making.

Agreements obtained by CoinDesk show that early advisers like Sam Thapaliya and Vinit Parekh were allocated large portions of MOVE token supply. Thapaliya was loaned 5% of MOVE’s supply for marketing purposes, valued at over $50 million based on recent prices. Thapaliya claims the agreements were never voided.

Thapaliya, referred to as a “shadow co-founder,” was involved in major decisions at Movement Labs and was allocated token supply for marketing and market-making purposes. His name surfaced in internal communications regarding Movement’s deal with Web3Port, which led to a token dump causing a sell-off.

Thapaliya claimed the signed agreements with Movement Labs were not binding but expressed intent to legally pursue his claim to retrieve tokens. The agreements, framed as non-binding memoranda of understanding, included provisions requiring consent from both parties for termination. Movement employees referred to Thapaliya as a key consultant.

Thapaliya’s involvement in Movement Labs’ deals and decision-making processes came to light through internal documents and communications. His work with Movement was consistent with the contract signed in 2023, including supporting discussions on exchange-related matters and hiring decisions, among other roles.

The use of informal agreements to allocate tokens quietly to insiders is a common practice in the crypto industry. Such deals can shape a project’s trajectory without official disclosures. The ease with which financial commitments can be made behind closed doors highlights a lack of transparency in fundraising practices within the industry.

CoinDesk reported similar cases of undisclosed token allocations in other crypto projects, emphasizing the need for greater transparency in the industry. This pattern of hidden financial commitments can impact the entire token ecosystem without the knowledge of investors or community members. The agreements were tailored to avoid disclosure to investors or community members, highlighting a lack of transparency in the industry. Movement Labs granted a Parekh entity control of 2.5% of the MOVE token supply in a separate agreement. Parekh’s firm, Digital Incubation Group, was tasked with various responsibilities, including strategy development and seed raising. The agreements were exploratory, with no funds changing hands between parties.

Parekh, a blockchain industry consultant, was heavily involved with Movement Labs, assisting with marketing, hiring, and strategy decisions. However, he emphasized that no money was exchanged in connection to the agreements. The fallout from Movement’s market-making scandal has led to a rift between co-founders Manche and Scanlon.

Manche was ousted from Movement Labs following reports of his involvement in controversial market-making agreements. He also facilitated a separate arrangement between Web3Port and Kaito, another crypto project. This arrangement was terminated shortly after being signed, unlike the Movement deal.

The controversy surrounding Movement Labs has damaged its reputation in the industry. Coinbase suspended trading of the MOVE token, causing a 50% price drop. Movement Labs announced the spinout of a new entity, Move Industries, with Scanlon stepping down as CEO but remaining with the organization.

Read more: Movement Labs Secretly Promised Advisers Millions in Tokens, Leaked Documents Show