Token replacement in doubt, founders in court, how did Gala Games, the former king of blockchain games, fall from the altar?

Recently, Gala Games, the former king of blockchain games, has once again attracted public attention due to the farce between its founders. Just last Thursday, it was revealed that the two co-founders of Gala Games, current CEO Eric Schiermeyer and co-founder Write Thurston, had filed lawsuits against each other.

It is reported that 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 of directors or shareholders, and engaging in systematic, purposeful and deceptive fraud to the interests of Gala Game and its shareholders.

Gala Games' investors and players began to panic. According to CoinGeoko data, as of press time, the Gala token has fallen by more than 25% in the past 14 days. In fact, in addition to the farce of the two founders, Gala Games has been in constant trouble since the pNetwork pGALA contract was attacked. So, how did the former king fall from the altar step by step?

The Birth of a King

Gala Games was founded in 2018 with the goal of becoming a decentralized gaming ecosystem, acting as the "Steam" of blockchain gaming, and bringing traditional game users into the world of blockchain gaming and the metaverse. Gala Games has the dual identities of a game developer and a game aggregation platform, and has introduced a node ecosystem where users can run nodes by purchasing node licenses to participate in the decentralized governance of the platform and obtain GALA tokens and NFT rewards; at the same time, the platform also gives players control over their assets in the game, and they can directly trade game items on the blockchain to earn revenue.

Behind this project that aspires to become the "Steam" of blockchain games is an equally eye-catching star team. It is reported that the CEO of Gala Games is Eric Schiermeyer, who is mentioned above. As a successful serial entrepreneur, he is the co-founder of the social game company and US-listed company Zynga. He has developed and operated many games such as FarmVille, Mafia Wars, and Cafe World. He is also the co-founder and CTO of the social media website Myspace, and an investor and consultant of the game company Bee Cave Games. The technical director team behind the scenes is also composed of senior people in the game industry.

With the advent of the Metaverse and GameFi trends in 2021, Gala Games' so-called "immersiveness" has become one of the reasons why major investors are optimistic about it, compared to the "Play to Earn" advocated by traditional chain games. The huge development framework, the dazzling team behind the scenes, and the rising GameFi craze made Gala Games the leading product of chain games at the time, and won the favor of investors. Major exchanges including Binance and Coinbase have successively launched GALA tokens, triggering a certain Fomo effect. And just after the launch of Binance, the development of GALA also reached its peak with the rise in the price of the currency. GALA rose from 0.02 USDT at the opening to 0.84 USDT, an increase of more than 40 times at one time, leading a new legend of getting rich quickly, and Gala Games' monthly active users also reached a peak of 1.3 million.

In fact, in the blockchain field, "success only takes one time", and Gala Games' ability to attract money also reached its peak at that time. At the end of 21, Gala Games began to invest intensively in the blockchain game field and the metaverse. It first stated that it would deploy $1 billion in South Korea for game development, and then cooperated with C² Ventures to launch a $100 million fund to invest in game developers and emerging projects built with blockchain technology. In early 2022, Gala even announced a high-profile Gala Games NFT expansion plan of up to $5 billion, of which $2 billion will be used for games, $1 billion will be used for music products, $1 billion will be used for movies, and $1 billion will be used for Gala theme park NFTs.

pNetwork Events

Just when everyone thought that everything would develop steadily and positively, the bear market came. With the sharp decline of BTC and the frequent occurrence of black swan events such as "FTX", Gala, as a copycat coin, was also doomed, and the price of the coin fell from 0.6 USDT to 0.03 USDT. What made the price of the coin even worse was the subsequent "pNetwork incident". The multi-chain routing protocol pNetwork pGALA contract was attacked, and more than $1 billion of pGALA tokens were minted out of thin air and sold on PancakeSwap for profit. The price of GALA on the chain directly fell off a cliff.

Subsequently, Gala Games announced that it was suing pNetwork on behalf of pGALA victims, claiming $27,671,934.80 to cover out-of-pocket expenses incurred due to breach of contract, additional damages, punitive damages, etc.

New token replacement is in doubt

Undoubtedly, the pNetwork incident not only had a serious impact on the price of Gala, but also dealt a huge blow to the development of Gala Games. Perhaps for security reasons and future upgradeability, Gala Games launched the v2 upgrade in May this year, adding an enhanced burning mechanism and arranging for all users holding GALA (v1) tokens on Ethereum to automatically receive new GALA (v2) tokens directly at a 1:1 ratio. After that, GALA (v1) will no longer be supported, and Coinbase will not support any airdrops for Gala v2, and recommends that users transfer GALA to self-custodial wallets to obtain potential airdrops.

But this has also caused widespread doubts among community users. Why did Gala Games need to transition from v1 tokens to v2 tokens? Why did Coinbase decide not to support GALA (v2)? However, users did not receive any clear answers. Everyone can't help but wonder what happened inside Gala Games? All of this has been answered in the recently disclosed indictment documents.

Two joint ventures go to court

According to Eric Schiermeyer's indictment, 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, only the remaining GALA v1 tokens were left in his wallet and could not be sold. In addition, at that time, Thurston had transferred about half of the 8.6 billion stolen tokens, worth about $130 million.

In addition, Eric Schiermeyer pointed out in the lawsuit that although Write Thurston founded many companies, most of them eventually became involved in lawsuits, went bankrupt or were sued by the US SEC. Gala Games seems to be his only legal business. It is reported that Green United, LLC, founded by Write Thurston, was sued by the SEC in March this year and was accused of deceiving investors in the unregistered issuance of crypto asset securities.

The notorious joint creation also greatly affected Gala Games' corporate reputation and brand image. After learning about this, Coinbase asked Gala Games about the SEC's lawsuit against Thurston and the ongoing relationship between Gala Games and Thurston. After learning that Thurston had stolen and began to liquidate the stolen GALA, Coinbase resolutely refused to support the GALA v2 upgrade.

In fact, Gala Games has been working hard to solve the problems that Write Thurston had planted in the early days, but "the truth will eventually come out". Under the dual pressure of the continuous decline in the coin price and the continuous community disputes, the two co-founders of Gala Games finally chose to go to court. Write Thurston also turned the tables on Eric Schiermeyer, accusing him of destroying tokens worth more than US$600 million and privately founding a competing company.

According to Write Thurston's indictment, Eric Schiermeyer destroyed more than $600 million worth of GALA tokens belonging to its shareholders and other members of the Gala community and wasted millions of dollars in company assets. He did not even upgrade GALA tokens as publicly stated, but transferred them to personal control wallets. In addition, Eric Schiermeyer borrowed millions of dollars from Gala Games for personal use, such as paying $5 million in installments to purchase a company jet, and privately created offshore entities in Switzerland and Dubai that were supposed to belong to Gala Games.

Currently, the two lawsuits are still under trial. According to analysis of the lawsuits from both parties, the internal conflict within Gala Games involved GALA assets valued at up to $730 million. The internal strife within the team also caused panic in the community.

According to CoinGeoko data, since the disclosure of the lawsuit, the price of Gala Games' token GALA has fallen by more than 98% from its peak, and has dropped by 10.4% in the past seven days. The current total market value is only approximately US$370 million.

Crypto celebrity @The_BTC_Express publicly stated on his Youtube that he has sold all the GALA tokens he holds and is no longer optimistic about GALA.

If the token swap was a fig leaf for the chaos within Gala Games, then going to court would completely expose all the internal scandals to the public.

The “over-centralization” of management has become the culprit

Gala Games may become the Waterloo of star entrepreneur Eric Schiermeyer. The reason is the over-centralization of corporate management.

Just like traditional Web2 companies, at the beginning, Eric Schiermeyer and Write Thurston shared all business opportunities in a 50:50 ratio, and all control of Gala Games was authorized by the two directors. However, decentralized technology in the blockchain field provides a perfect "opportunity to commit crimes" for this relatively centralized configuration. The problems of centralization and transparency in governance are clearly revealed in Gala Games. When the control of Gala Games is completely in the hands of Eric Schiermeyer and Write Thurston, they can use decentralized technology to manipulate the company's assets at will without supervision by others, so it is not surprising that the company's funds are abused and misappropriated.

However, when the funding hole gets bigger and bigger, the entire company and its future will fall into the abyss, and in the end only users will pay for it, which also proves the importance of decentralized governance and on-chain governance.

At present, this farce has not been concluded. Gala Games also stated on its official Twitter that the litigation between the co-founders is a personal dispute and has no substantial connection with the company's operations. In addition, according to the latest developments of Gala Games, Gala Games 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 to external teams by the end of the year.

Perhaps with the advancement of new progress, the impact of this incident on Gala Games will be digested by the market, and the current urgent issue is how to repair the damaged brand reputation and user trust. Management reorganization of "decentralized governance" may be a good choice.