If token swapping is the fig leaf for internal chaos within Gala Games, then taking it to court is a way to expose all internal scandals to the public.
Written by: Mia, ChainCatcher
Recently, Gala Games, once the king of blockchain games, has once again caught public attention due to the drama between its founders. Last Thursday, blockchain game developer Gala Games was exposed for a lawsuit filed by its two co-founders and current CEO Eric Schiermeyer and co-founder Write Thurston against each other.
According to reports, Eric Schiermeyer accused Wright Thurston of stealing $130 million worth of GALA tokens through his company True North United Investments in 2021, while Write Thurston accused Eric Schiermeyer of selling and wasting millions of dollars of company assets for personal gain without the knowledge or approval of the board or shareholders, and engaging in deceptive activities that were deliberate and harmful to Gala Games and its shareholders.
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Gala Games’ investors and players have started to panic. According to CoinGeoko data, as of the time of writing, the price of Gala tokens has dropped by over 25% in the past 14 days. In fact, apart from the drama between the two founders, Gala Games has been facing constant issues since the pNetwork pGALA contract was attacked. So, how did the former king gradually fall from grace?
The Birth of a King
Gala Games was founded in 2018 with the aim of becoming a decentralized gaming ecosystem, a “Steam” in the world of blockchain games, bringing traditional gamers into the world of blockchain games and metaverses. Gala Games serves as both a game developer and a game aggregation platform, introducing a node ecosystem where users can run nodes by purchasing node licenses to participate in the platform’s decentralized governance and earn GALA tokens and NFT rewards. At the same time, the platform gives players control over their in-game assets, allowing them to directly trade game items on the blockchain and earn profits.
Behind this project aspiring to be the “Steam” of blockchain games is also a star-studded team that has attracted attention. It is reported that Eric Schiermeyer, the CEO of Gala Games mentioned earlier, is a successful serial entrepreneur and co-founder of social gaming company Zynga, which is listed on the U.S. stock market. He has developed and operated numerous games such as FarmVille, Mafia Wars, and Cafe World, and is also a co-founder and CTO of social media website MysLianGuaice, as well as an investor and advisor to game company Bee Cave Games. The behind-the-scenes technical director team is also composed of industry veterans.
With the rise of the metaverse and GameFi in 2021, Gala Games’ so-called “immersive” gaming experience, compared to the “Play to Earn” philosophy advocated by traditional blockchain games, has become one of the reasons favored by major investors. The huge development framework, impressive behind-the-scenes team, and the growing GameFi trend have made Gala Games the leading product in the blockchain gaming industry at that time, winning the favor of investors. Major exchanges, including Binance and Coinbase, have successively listed GALA tokens, sparking a certain FOMO effect. After being listed on Binance, GALA’s development peaked as its price soared. GALA went from an opening price of 0.02 USDT to a peak of 0.84 USDT, an increase of more than 40 times, leading to a new legend of getting rich overnight, and Gala Games reached a peak of 1.3 million monthly active users.
In fact, in the field of blockchain, “success only takes one time”, and Gala Games’ ability to attract money reached its peak at that time. At the end of 2021, Gala Games started investing heavily in the blockchain gaming industry and metaverse. They first announced that they would deploy $1 billion in South Korea for game development, and then partnered with C² Ventures to launch a $100 million fund for investing in game developers and emerging projects built on blockchain technology. In early 2022, Gala even announced a high-profile $5 billion Gala Games NFT expansion plan, with $2 billion for games, $1 billion for music products, $1 billion for movies, and $1 billion for Gala theme park NFTs.
pNetwork Incident
Just when everyone thought everything was developing steadily and improving, the bear market arrived. With the sharp decline of BTC, coupled with frequent black swan events like “FTX”, Gala, as a altcoin, was also in trouble. Its token price dropped from 0.6 USDT to 0.03 USDT. What made the situation worse was the subsequent “pNetwork incident”. The multi-chain routing protocol pNetwork pGALA contract was attacked, and over $1 billion worth of pGALA tokens were forged and sold for profit on LianGuaincakeSwap, causing a direct cliff-like drop in the price of GALA on the chain.
Afterwards, Gala Games announced that they would sue pNetwork on behalf of the pGALA victims, claiming $27,671,934.80 to cover the costs incurred due to breach of contract, additional damages, punitive damages, etc.
New Token Replacement Doubts
Undoubtedly, the pNetwork incident not only severely impacted the price of Gala tokens, but also dealt a huge blow to the development of Gala Games. Perhaps for security reasons and future upgradability, Gala Games launched the v2 upgrade in May this year, adding enhanced burning mechanisms, and arranged for all users who hold GALA (v1) tokens on Ethereum to automatically receive the new GALA (v2) tokens at a 1:1 ratio. Afterwards, GALA (v1) will no longer be supported, and Coinbase will not support any airdrops of Gala v2, and advises users to transfer GALA to self-hosted wallets to receive potential airdrops.
But this has also raised widespread questions from the community users. Why does Gala Games need to transition from v1 tokens to v2 tokens? Why did Coinbase decide not to support GALA (v2)? However, users have not received any clear answers, and everyone can’t help but speculate on what has happened inside Gala Games. All of this was revealed in the recently disclosed lawsuit documents.
Two Co-founders in Court
According to Eric Schiermeyer’s lawsuit documents, due to the inability to recover the stolen GALA (v1) tokens from co-founder Write Thurston, and the inability to publicly disclose the stolen GALA without causing panic, Gala Games was forced to release GALA v2 in May 2023. When GALA v2 replaced GALA v1, the remaining GALA v1 tokens in his wallet could not be sold. At that time, Thurston had already transferred about half of the stolen tokens, worth approximately $130 million.
In addition, Eric Schiermeyer also pointed out in the lawsuit that although Write Thurston founded many companies, most of them eventually ended up in litigation, bankruptcy, or being sued by the U.S. SEC. Gala Games seems to be his only legitimate enterprise. It is reported that Green United, LLC, founded by Write Thurston, was sued by the SEC in March this year and was accused of defrauding investors in the issuance of unregistered cryptocurrency securities.
The tarnished reputation of the co-founder has greatly affected the company’s credibility and brand image. After learning about this situation, Coinbase inquired about the SEC’s lawsuit against Thurston and the ongoing relationship between Gala Games and Thurston. After learning that Thurston had stolen and started liquidating the stolen GALA, Coinbase decisively refused to support the GALA v2 upgrade.
In fact, Gala Games has been working hard to solve the problems created by Write Thurston in the early stages. However, “paper can’t hold fire forever.” Under the dual pressure of continuous price decline and community controversies, the two co-founders of Gala Games finally chose to go to court. Write Thurston also accused Eric Schiermeyer of destroying over 600 million US dollars worth of GALA tokens belonging to its shareholders and the Gala community, wasting millions of dollars of company assets, and not upgrading the GALA tokens as publicly stated, but transferring them to a personal control wallet. In addition, Eric Schiermeyer also borrowed millions of dollars from Gala Games for personal use, such as paying 5 million US dollars in installments to purchase a company plane, and privately creating offshore entities in Switzerland and Dubai that should have belonged to Gala Games.
Currently, these two lawsuits are still under review. According to the analysis of both sides’ lawsuits, the internal conflict at Gala Games involving the value of GALA assets has reached 730 million US dollars. This internal dispute has also caused community panic.
According to CoinGeoko data, since the disclosure of the lawsuit, the price of the Gala Games token GALA has fallen by over 98% from its highest point, and has dropped by 10.4% in the past 7 days. The current total market value is only about 370 million US dollars.
Crypto influencer @The_BTC_Express publicly stated on his YouTube channel that he has sold all the GALA tokens he holds and will no longer support GALA.
If token replacement is the fig leaf for the internal chaos at Gala Games, then going to court is a complete exposure of all internal scandals to the public.
“Overcentralization” in management has become the culprit
Gala Games may become a Waterloo for star entrepreneur Eric Schiermeyer, and the reason behind it lies in the overcentralization of corporate management.
Just like traditional Web2 companies, at the beginning of its establishment, Eric Schiermeyer and Write Thurston shared all business opportunities in a 50:50 ratio, and the control of Gala Games was authorized by the two directors. However, the decentralized technology in the blockchain field provides a perfect “opportunity” for this relatively centralized configuration. The issues of centralization and transparency in governance are evident in Gala Games. When the control of Gala Games is entirely in the hands of Eric Schiermeyer and Write Thurston, they can manipulate company assets at will using decentralized technology without being regulated by others. Therefore, it is no surprise that misuse and embezzlement of company funds occur.
However, as the financial hole becomes larger and larger, the entire company and its future will fall into the abyss, and in the end, only users will bear the consequences. This also proves the importance of decentralized governance and on-chain governance.
Currently, there is no conclusion to this farce, and Gala Games has stated on its official Twitter that the litigation issue between co-founders is a personal dispute and has no substantial connection with company operations. In addition, according to the latest news from Gala Games, Gala Games will fully migrate the Gala platform to GalaChain before the end of the year and simplify the user experience and development tools to provide comprehensive self-service for external teams by the end of the year.
Perhaps in the progress of new developments, the impact of this incident on Gala Games will be absorbed by the market. The urgent matter at present is how to repair the damaged brand reputation and regain the trust of users. The management restructuring of “decentralized governance” may be a good choice.
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