Movement Lab, a scandal-stricken crypto startup supported by Donald Trump’s World Liberty Financial, quietly promised early insiders a massive stake on its token.
Even before the token launch, Movement Labs committed most of the supply of moves to a few early advisors. This was never disclosed to investors and only emerged through internal documents reviewed by Coindesk.
Two business notes obtained by Coindesk (one promises one advisor for nearly $2 million a year) show the Movement, founded in 2023 by two 20-year-old Vanderbilt Dropouts, and are leaning heavily towards these advisors to gain foothold in the crypto industry.
Movement Lab said the agreement dated shortly after the project was established was inherently exploratory and non-binding.
Nevertheless, the existence of the agreement laid a new light on the chaotic movement of the movement after Coindesk reported last month that insider market production transactions enabled token dumping by insiders.
The fallout centers around who moved to a predatory agreement with Chinese market makers under conditions that have caused a wave of fingerpoints within the company and stated predatory sales encouraged by analysts.
Tensions boiled into a public rift between co-founder Rush Manche, who was fired by the Movement Lab this month, and Cooper Scanlon, who has retreated from his CEO role but remains in the company.
“When we started the move, I was the CTO. I was leading the engineering team. I left most of the business decisions, including contracts, to Cooper,” Manche told Koindsk in an interview with the report. “When priorities changed, our role changed, but early Cooper’s decisions were a big shaping of the way the launch went.”
Shadow Advisor
Coindesk spoke with more than 12 people who were familiar with the movement during the course of the investigation, including current and former employees who were given anonymity to allow them to speak freely.
The deal that Coindesk has been awarded involves Sam Thapaliya and Vinit Parekh. Together, they were assigned access to up to 10% of the total mobile token supply in a signed memo that said insiders were intentionally protected from books.
Thapaliya, CEO of Zebec Protocol and early advisor to Manche and Scanlon, rented out 5% of Move’s supply for marketing and marketing purposes, according to one of the contracts acquired by Coindesk. In the second contract, Thapaliya allocates 2.5% of the total supply of tokens, worth more than $50 million at its recent price.
Excerpt from the agreement between Sam Thapaliya (“Thapalyia Trust”) and Movement Labs (retrieved by Coindesk) (click to view document)
Movement Lab told Koindsk that the agreement signed with Tapariya was not binding, but Tapariya argued that the agreement was “never voided.”
The contracts considered by Coindesk are bound by a memorandum of understanding (usually considered non-binding), but also include provisions that “parties” must agree to termination.
“I will legally pursue it to exercise my claim to recover 2.5% of the token,” Tapariya said.
Movement employees called Thapaliya “Shadow Cofounder” and said they were frequently consulted with Scanlon and Manche about large-scale decisions.
His name also emerged in internal communications regarding the movement’s deal with Web3port. The Chinese market maker was accused of dumping $38 million in tokens after Move’s debut. This is the event that caused the sale and ban on Binance accounts.
The amount loaned to Web3port, which is 5% of Move’s supply, was the same as the amount loaned to Thapaliya on each contract.
When contacted by Coindesk prior to the initial investigation, Thapaliya denied having any financial interest in the Movement Lab or the Movement Foundation. He also denied any involvement in Web3port transactions.
In a later message about the signal, Thapaliya told Coindesk that its work with the movement was consistent with the agreement. “According to the agreement signed in February 2023, it helped to meet the terms agreed to support Cooper (Scanlon) in exchange-related discussions, strategize token allocation, help select market manufacturers, and adopt the airdrop model.”
Understanding notes
The use of informal contracts to quietly assign tokens to insiders reflects a broader pattern within the crypto industry. There, a large amount of money can be changed without appearing in official funding disclosures.
In 2024, Coindesk reported that Eclipse, another project associated with Thapaliya, secretly allocated 5% of the token supply to employees of PolyChain, the leading crypto venture company that later invested in the project. PolyChain is also an investor in Movement Labs. Eclipse’s contract with PolyChain employees was scrapped following the announcement of a Coindesk investigation.
What these cases show, although not necessarily fraud, is the ability for crypto startups to make important financial commitments behind closed doors. This is a commitment that can later shape the trajectory of the entire token ecosystem, unless the community or some employees know about it.
Those familiar with the issue said the movement’s agreement was tailored to explicitly avoid disclosure to investors and community members.
In another 2023 agreement acquired by Coindesk, Movement Labs agrees to provide Vinit Parekh linked entities of $50,000 per year for every $1 million raised by Movement Labs. Another contract granted separate Parekh entity control of 2.5% of the mobile token supply.
Excerpt from the agreement between Movement Lab and Digital Incubation Group (retrieved by Coindesk) (click to view document)
In exchange for his allocation, Parekh’s company, Digital Incubation Group, will be engaged in “developing a strategic framework validated by relevant stakeholders, consulting through pre-investment pay raise processes (including advice and connections to investors), developing toconemics, developing toconemics, and structuring release plans.
Like the Thapaliya agreement, Parekh was constituted as a memorandum of understanding with dismissal clauses requiring consent from both “parties.” Both Parekh and Movement Labs said the agreement was exploratory and that funds have not changed hands between either party.
Two people close to Movement Labs said Parekh, a blockchain industry consultant at Microsoft Product Manager, is frequently present at Movement’s San Francisco Office, playing a role in the company’s hiring, marketing and strategy decisions.
“I just care about the ecosystem,” Parev told Coindesk in an interview. “To me and those I know, “in relation to contracts” (b) I helped them understand marketing strategies and how to get to the market. ”
The cleft between founders
The fallout from the movement’s market production scandal is rifting between co-founders Manche and Scanlon.
After an excerpt from one of the Thapaliya contracts leaked to X, Manche pointed to Scanlon’s signature on the note, highlighting the role of his former partner in approving the transaction. He also reposted a message questioning whether Movement Lab was “threw under the bus (Manche)” while Scanlon “played innocently.”
Manche was banished from Movement Labs earlier this month shortly after reporting that Coindesk had helped coordinate the controversial market establishment agreement with Web3port with the intermediary known as Rentech.
Coindesk has also learned that Manche also plays a role in facilitating another arrangement between Web3port and Kaito, another Crypto project that shares the same director and general counsel as the Movement Foundation. The agreement reviewed by Coindesk shows that the Openkaito Foundation has lent 2.5% of its Kaito token supply to Web3port for market production purposes.
According to an X post by Kaito founder Yu Hu, the contract that was also leaked by anonymous accounts ended shortly after it was signed. Unlike the exercise contract, the conditions that experts said encouraged pump and dump operation were not included.
Those familiar with the issue said Manche introduced kite to rentech and connected the project to Web3port.
The controversy has already devastated the reputation of movement in an industry that once saw startups as rising stars. Coinbase, the largest US crypto exchange, announced on May 15th that it will suspend trading of mobile tokens. Token prices fell 50% the following week.
On May 7, Movement Labs said Movement Industries, a new entity that will serve as the network’s leading developer, is spinning out. Scanlon stays with the organization, but resigns as CEO.
