Mia, ChainCatcher
Just recently, the former king of blockchain games, Gala Games, has once again attracted public attention due to the drama between its founders. Last Thursday, blockchain game developer Gala Games was exposed to a lawsuit between its two co-founders, current CEO Eric Schiermeyer and co-founder Write Thurston.
It is reported that Eric Schiermeyer accused Wright Thurston of stealing 130 million USD 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 systematic, purposeful, and damaging deceptive behavior that harmed Gala Games and its shareholders.
Gala Games investors and players have begun to panic. According to CoinMarketCap data, as of the time of writing, the GALA token has dropped by over 25% in the past 14 days. In fact, aside from the drama between the two founders, Gala Games has been plagued with issues since the pNetwork pGALA contract was attacked. So, how exactly did the former king fall from grace?
The Birth of a King
Gala Games was founded in 2018 with the aim of becoming a decentralized gaming ecosystem, serving as the "Steam" of blockchain games, bringing traditional gamers into the world of blockchain gaming and the metaverse. 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. The platform also empowers players with control over in-game assets, allowing them to directly trade game items on the blockchain for profit.
Behind this project aspiring to be the "Steam" of blockchain games is an equally eye-catching star-studded team. Gala Games' CEO, as mentioned earlier, is Eric Schiermeyer, a successful serial entrepreneur who co-founded the social gaming company and publicly traded company Zynga, developing and operating numerous games such as FarmVille, Mafia Wars, and Cafe World. He also co-founded and served as CTO of the social media website Myspace, and was an investor and advisor for the game company Bee Cave Games. The technical directorate team behind him is also composed of seasoned professionals in the gaming industry.
With the rise of the metaverse and GameFi in 2021, Gala Games' so-called "immersive" gaming experience, as opposed to the "Play to Earn" approach favored by traditional blockchain games, became one of the reasons why major investors were optimistic. The extensive development framework, impressive behind-the-scenes team, and the rising GameFi trend made Gala Games the leading product in the blockchain gaming industry at the time, winning the favor of investors. This led to major exchanges such as Binance and Coinbase listing the GALA token, sparking a certain level of FOMO. Following its listing on Binance, GALA's development peaked as its price surged from an opening of 0.02 USDT to a high of 0.84 USDT, a surge of over 40 times, leading to a new legend of sudden wealth. Gala Games also reached a peak of 1.3 million monthly active users.
In the blockchain field, "success only needs to happen once," and Gala Games' fundraising ability reached its peak at the time. At the end of 2021, Gala Games began intensive investments in the blockchain gaming sector and the metaverse, first announcing a deployment of $1 billion for game development in South Korea, followed by a collaboration with C² Ventures to launch a $100 million fund for investing in game developers and emerging projects utilizing blockchain technology. In early 2022, Gala even announced a high-profile $50 billion Gala Games NFT expansion plan, with $20 billion allocated for games, $10 billion for music products, $10 billion for movies, and $10 billion for Gala-themed park NFTs.
pNetwork Incident
Just when everyone thought everything was going to develop steadily, the bear market arrived. With the sharp decline of BTC, coupled with frequent "black swan" events like "FTX," Gala, as a "copycat" coin, also suffered. Its price plummeted from 0.6 USDT to 0.03 USDT. What further exacerbated its price was the subsequent "pNetwork incident," where the multi-chain routing protocol pNetwork pGALA contract was attacked, resulting in over $1 billion worth of pGALA tokens being minted out of thin air and sold for profit on PancakeSwap, directly causing a cliff-like drop in the price of GALA on the chain.
Subsequently, Gala Games announced a lawsuit against pNetwork on behalf of the pGALA victims, seeking $27,671,934.80 to cover self-payment costs due to breach, additional damages, punitive damages, and more.
Suspicions Arise Over New Token Replacement
Undoubtedly, the pNetwork incident not only severely impacted the price of GALA but also dealt a huge blow to the development of Gala Games. Perhaps out of consideration for security and future upgradability, Gala Games launched the v2 upgrade in May of this year, introducing enhanced burning mechanisms and arranging for all users holding GALA (v1) tokens on Ethereum to automatically receive the new GALA (v2) tokens at a 1:1 ratio. Subsequently, GALA (v1) would no longer be supported, and Coinbase would not support any airdrops of Gala v2, advising users to transfer GALA to self-custody wallets to receive potential airdrops.
However, this move has sparked widespread skepticism among the community. Why does Gala Games need to transition from the v1 token to the v2 token? Why did Coinbase decide not to support GALA (v2)? Users have not received any clear answers, leading to speculation about what exactly happened within Gala Games. All of these questions were answered in the recently disclosed lawsuit documents.
Showdown Between the Two Co-Founders
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 no longer be sold. Additionally, at that time, Thurston had already transferred approximately half of the stolen tokens, worth about $130 million.
Furthermore, Eric Schiermeyer pointed out in the lawsuit that although Write Thurston had founded many companies, most of them had ended up in litigation, bankruptcy, or being sued by the U.S. SEC. Gala Games seemed to be his only legitimate business. It is reported that Green United, LLC, founded by Write Thurston, was sued by the SEC in March of this year, accused of deceiving investors in the issuance of unregistered crypto asset securities.
The tarnished reputation of the co-founder has greatly impacted Gala Games' corporate credibility and brand image. After learning about the situation, Coinbase inquired with Gala Games about the SEC's lawsuit against Thurston and the ongoing relationship between Gala Games and Thurston. Upon learning that Thurston had stolen and begun liquidating the stolen GALA, Coinbase decisively refused to support the GALA v2 upgrade.
In fact, Gala Games has been working hard to address the problems left by Write Thurston in the early days, but "the truth will eventually come to light." Under the dual pressures of continued price decline and community controversies, the two co-founders of Gala Games finally chose to go to court, with Write Thurston also counter-accusing Eric Schiermeyer of destroying over $600 million worth of tokens belonging to shareholders and the Gala community, wasting millions of dollars of company assets, and not upgrading the GALA tokens as publicly announced, but instead transferring them to a personal control wallet. Additionally, Eric Schiermeyer had borrowed millions of dollars from Gala Games for personal use, such as paying $5 million in installments to purchase a company plane, and privately creating offshore entities in Switzerland and Dubai that should have belonged to Gala Games.
These two lawsuits are still under trial, and according to the analysis of the lawsuits by both parties, the internal conflict within Gala Games involving the value of GALA assets has reached as high as $730 million, sparking panic within the community.
According to CoinGeoko data, since the disclosure of the lawsuit documents, the price of GALA tokens from Gala Games has dropped by over 98% from its peak, with a decrease of 11.5% in the past 7 days, and the current total market value is only about $380 million.
Crypto influencer @TheBTCExpress publicly announced on his YouTube channel that he has sold all of his GALA tokens and will no longer be bullish on GALA.
If the token replacement is the fig leaf of internal chaos for Gala Games, then the court battle is the complete exposure of all internal scandals.
"Overly Centralized" Management as the Culprit
Gala Games may become the Waterloo for star entrepreneur Eric Schiermeyer, and the reason behind it lies in the overly centralized management of the company.
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 all control of Gala Games was authorized by the two directors. The decentralized technology in the blockchain field provided the perfect "opportunity" for this relatively centralized configuration. The issues of centralization and transparency in governance are undoubtedly revealed in Gala Games. When the control of Gala Games is completely in the hands of Eric Schiermeyer and Write Thurston, they can manipulate company assets at will using decentralized technology without being supervised by others, so the occurrence of misuse and embezzlement of company funds is not surprising.
However, as the financial hole grows larger, the entire company and its future will fall into an abyss, and in the end, it is the users who will bear the brunt. This also proves the importance of decentralized governance and on-chain governance.
Currently, this drama has not yet reached a conclusion, and Gala Games has stated on its official Twitter account that the lawsuit between the co-founders is a personal dispute and has no substantive connection to the company's operations. In addition, according to the latest updates from Gala Games, Gala Games will fully migrate the Gala platform to GalaChain by 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 as the new developments progress, the impact of this incident on Gala Games will be absorbed by the market, and the urgent matter at hand is how to restore the damaged brand reputation and regain the trust of users. A management restructuring of "decentralized governance" may be a good choice.
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