Gaming Token $GALA Calls In FBI Over $21 Million Token Hack

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  • Gala Games experienced a significant security breach involving the theft and unauthorized sale of approximately $21-23 million worth of GALA tokens.
  • CEO Eric Schiermeyer confirmed the breach, attributing it to internal control failures.
  • Despite the breach, the Ethereum contract used by Gala Games remained secure.
  • The incident led to a temporary decline in the value of GALA tokens, although the market price has somewhat stabilized since the breach.
  • Legal disputes have arisen between co-founders Eric Schiermeyer and Wright Thurston, adding to the company's challenges.

Blockchain-based gaming platform Gala Games has suffered a major security breach, resulting in the theft and sale of approximately $23 million worth of GALA tokens.

On May 20, crypto enthusiasts and observers reported that 5 billion GALA tokens, valued at around $200 million at the time, were minted. However, the responsible wallet was quickly selling the tokens in batches, successfully liquidating a portion of the stolen assets.

In a post on X shortly after the breach, Gala Games CEO Eric Schiermeyer acknowledged the breach and stated that the company had identified the individual allegedly responsible for the incident.

He said Gala Games has taken immediate action by collaborating with the Federal Bureau of Investigation (FBI), the United States Justice Department, and a network of international authorities to address the situation.

“We believe we have identified the culprit, and we are currently working with the FBI, DOJ and a network of international authorities.”

Internal Control Issues Lead to $21M Token Theft

The incident, described as a “security incident” involving a smart contract, was attributed to internal control failures within Gala Games, allowing the unauthorized sale of 600 million GALA tokens and the burning of 4.4 billion tokens.

“We had an incident that resulted in the unauthorized SALE of 600 million […] GALA tokens and the effective BURN of 4.4 billion tokens,” Schiermeyer wrote. “We messed up our internal controls. This shouldn’t have happened, and we are taking steps to ensure it doesn’t happen again.”

The reference to internal controls has led to speculation that the bad actor had access to a company administrative wallet.

Schiermeyer assured users that Gala Games had rectified the compromise by removing unauthorized access to the GALA smart contract. He emphasized that the Ethereum contract itself remained secure and had never been compromised.

However, Gala Games did not disclose specific details regarding the identity of the perpetrator or how they gained access to the GALA contract.

“There is the issue of our daily distribution…we will be having a node vote on how to handle this issue. As usual the community will decide how we proceed,” Schiermeyer added.

Following the incident, the price of GALA tokens experienced a decline, dropping as low as $0.039, a 19% decrease from the day’s earlier high. However, the token’s value has since recovered and stabilized at around $0.041, according to data from CoinGecko.

Gala Games Founders Sue Each Other

It is not the first in-house drama at GALA: In September, the co-founders of Gala Games, Eric Schiermeyer and Wright Thurston, filed lawsuits against each other, accusing one another of misconduct and misappropriation of company assets worth millions of dollars.

Schiermeyer’s legal complaint alleges that Thurston and his investment entity, True North United, unlawfully obtained $130 million worth of GALA tokens. Initially, Thurston claimed that the tokens would be securely stored for the benefit of Gala Games.

However, according to the lawsuit, Thurston and True North engaged in deceptive transactions, transferring, exchanging, or selling the tokens without proper authorization.

In addition to the alleged token theft, Thurston is accused of taking licenses for operating nodes within the Gala ecosystem, which generate GALA tokens, and selling them while keeping the profits for himself.

Schiermeyer’s complaint also references a separate lawsuit filed by the Securities and Exchange Commission (SEC) against Thurston and his firm, Green United. The SEC alleges that they deceived investors through an unauthorized investment offering known as “Green Boxes” or “Green Nodes”.

In a counterclaim, Thurston accuses Schiermeyer of mismanaging Blockchain Game Partners, the registered name for Gala Games. He alleges that Schiermeyer wasted $600 million of company assets and diverted millions of dollars for personal use.

Thurston also claims that Schiermeyer set up businesses in Switzerland and Dubai to capitalize on opportunities that should have belonged to Gala Games.

Both Schiermeyer and Thurston seek to remove each other as directors of the company.

The Bottom Line

Gala Games experienced a major security breach, resulting in the theft of approximately $21 million worth of GALA tokens.

According to CEO Eric Schiermeyer, the incident was a result of internal control failures, which allowed the unauthorized sale of 600 million tokens and the burning of an additional 4.4 billion.

In response, Gala Games has contacted international law enforcement agencies, including the FBI and the DOJ, to track down and address the breach.

It is far from the only drama at the top of GALA and only detracts from a project that has rightly carved out a niche in non-fungible tokens and on-chain gaming.

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