Author: Nancy, LianGuaiNews
Recently, Jake Browatzke, the founder of Magic Book, revealed on social media that the Gala Games team, a blockchain gaming platform, is in turmoil. Founder and CEO Eric Schiermeyer and co-founder Write Thurston have filed lawsuits against each other, accusing each other of “coin theft and market manipulation” and “misuse of funds,” involving $730 million worth of $GALA assets.
Subsequently, Jason Brink, President of Gala Games, confirmed the internal dispute in a post and stated that he would not comment on the ongoing litigation. He personally upholds the principle of transparency and encourages everyone to read the complaints filed by the two co-founders in their entirety and welcomes further discussion. So, what information is revealed in these two lawsuits? What points are worth noting?
Eric Schiermeyer accused of destroying over $600 million worth of tokens and secretly starting a competing company
Before we dive into the article, let’s first understand the background of Gala Games. Gala Games is a blockchain video gaming and entertainment company with annual revenues in the millions of dollars and hundreds of employees. According to the initial agreement, Eric Schiermeyer and Write Thurston were supposed to share all business opportunities in a 50:50 ratio, and the control of the company was authorized by the two directors.
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On August 31st, Eric Schiermeyer and Write Thurston filed lawsuits against each other in the Utah State Court in the United States. Write Thurston, on behalf of True North, an investment company located in Wasatch County, Utah, and a shareholder of Blockchain Game LianGuairtners (BGP), the parent company of Gala Games, holding 44.762% of the shares, accuses Eric Schiermeyer. Eric Schiermeyer has been the President of BGP since 2009.
In this complaint, Write Thurston points out that after the initial distribution of the $GALA tokens, any remaining and additional Gala and NFT tokens received by True North and Eric Schiermeyer were stored in the latter’s separate controlled wallet. However, without the approval or knowledge of the board of directors or shareholders, Eric Schiermeyer destroyed over $600 million worth of $GALA tokens belonging to its shareholders and other members of the Gala community and wasted millions of dollars of company assets. Additionally, he did not upgrade the $GALA token as publicly stated but transferred it to his personal controlled wallet. Furthermore, Eric Schiermeyer borrowed millions of dollars from Gala Games for personal use, such as paying $5 million in installments to purchase a company plane, and privately created offshore entities in Switzerland and Dubai that should have belonged to Gala Games. He unilaterally appointed himself as the controlling shareholder and seized business opportunities that should have belonged to BGP. He also provided severely incomplete or incorrect financial information and did not provide necessary company records to True North.
In addition, the lawsuit also states that Eric Schiermeyer has already or intends to transfer or use most of BGP’s current business, technology platforms, assets, and intellectual property. For example, he recently announced the distribution of 8,000 nodes to BGP employees and the closure of True North’s nodes, which will generate valuable digital assets. However, Eric Schiermeyer’s decision to do so without disclosing and obtaining approval from the board of directors or shareholders will harm the interests of shareholders and the value of the company. Prior to this, Eric Schiermeyer had also closed True North’s nodes without authorization.
Write Thurston alleges that Eric Schiermeyer’s misconduct, mismanagement, and self-dealing have caused billions of dollars in losses to the reputation and shareholder assets of BGP. He has violated his fiduciary duties and refused all good-faith negotiations. Considering that BGP requires a two-thirds majority vote and there are only two major shareholders, True North and Eric Schiermeyer, Write Thurston hopes to use this lawsuit to remove him from his positions as director, president, and CEO, and to seek damages of no less than $600 million, as well as compliance with the terms of the founder agreement.
Write Thurston accused of stealing and selling over $130 million worth of GALA tokens and not participating in company operations for years
In another lawsuit, Eric Schiermeyer stated that Write Thurston and True North stole over 864 million $GALA tokens (about 20% of the total supply at the time) from Gala Games and claimed to have placed them in a secure wallet for the company’s benefit. However, he is suspected of transferring and selling $130 million worth of $GALA tokens (about half of the stolen assets). At the same time, Write Thurston also stole licenses to operate “nodes” on the Gala ecosystem and sold them to others, manipulating the nodes to earn $GALA tokens for himself or True North, and they have been sued by the buyers of the stolen assets. It is worth mentioning that earlier this year, the US SEC sued Write Thurston and True North for alleged fraudulent activities related to energy-saving cryptocurrency company “Green Boxes”.
Eric Schiermeyer also pointed out in the lawsuit that although Write Thurston has founded many companies, most of them have ended up in lawsuits, bankruptcy, or being sued by the US SEC. Gala Games seems to be his only legitimate enterprise. In terms of company operations, apart from guiding the company’s annual tax returns, Write Thurston has not been involved in the company’s day-to-day operations for many years and has been an absentee director who recently resigned. In the past few years, the company has been working to resolve the problems caused by Write Thurston’s early actions. After discovering Write Thurston’s theft, it was believed that contacting the authorities or filing lawsuits at that time could lead to the liquidation of the stolen $GALA. Therefore, the company had no choice but to rely on his statement, considering him the custodian of $GALA’s security. However, based on Write Thurston’s secret sale of assets and his prevention of the company from recovering the stolen assets, his only response was to sell some assets to buy firearms and ammunition. The claim of protecting the security of the company’s $GALA assets is false.
In addition, the lawsuit also reveals the issue of centralization risk in Gala Games nodes. Write Thurston (or the companies under his control) and Eric Schiermeyer each obtained 7,000 Gala Nodes in the early days of Gala Games. However, both co-founders agreed not to operate these nodes because their centralization would contradict the company’s decentralized goals.
Eric Schiermeyer believes that Write Thurston’s fraudulent behavior has caused significant damage to the reputation and brand of Gala Games. For example, Coinbase refused to support the GALA v2 upgrade after the SEC lawsuit. He requests the court to make a judgment against Write Thurston and True North and order the defendants to return and compensate for any profits from the stolen value of millions of $GALA tokens, as well as to remove them from their positions as directors and compensate for all litigation and legal expenses.
The token has dropped over 97% from its peak, and will migrate to GalaChain by the end of the year
The internal dispute within the Gala Games team has also caused community panic. According to CoinGecko data, as of September 4th, the Gala Games token $GALA has dropped over 97.9% from its highest point, with a current total market value of approximately $430 million, far below the mentioned $730 million GALA assets in the lawsuit, and a drop of over 16% from the lawsuit’s price.
According to the latest update from Gala Games, the project will fully migrate the Gala platform to GalaChain by the end of the year, and simplify the usage threshold and development tools to provide comprehensive self-service for external teams before the end of the year. In addition, the social media platform Rep, built on GalaChain, has entered the QA stage of migration from NEAR. In addition, Gala Games’ games have not been affected by the lawsuit, and multiple projects have made positive progress. According to official disclosure, the 3A game Champions Arena had over 70,000 downloads in its first week, with a conversion rate of 10% from Web2 users to Web3. The social poker game PokerGO has launched its iOS version. The blockchain game Town Star is about to release its roadmap and token economy model.
From the content of the two aforementioned lawsuits, issues such as the misuse and misappropriation of company funds and node resources, poor management, and improper business conduct have fully exposed Gala Games’ problems in governance, centralization, and transparency, highlighting the necessity of decentralized governance. Despite the unresolved internal dispute within Gala Games, investors are left to bear the cost of the project’s governance mistakes.