Gala Sues pNetwork on Behalf of pGala Victims

JACKSON, Wyo., March 20, 2023 /PRNewswire/ -- Gala Games, a pioneer in web3 entertainment, recently filed a negligence and tortious interference with business expectancy lawsuit against pNetwork, a cross-chain bridge provider. Gala alleges that pNetwork failed to address a misconfiguration in its code, giving the false appearance of a 1B hack and unfairly led to a disruption in the market for Gala's own native token, GALA, and required a substantial expenditure by Gala as a result of this disruption.

$GALA, a native ERC-20 token on the Ethereum blockchain, had been bridged to BNB Smart Chain (BSC) using a bridge dApp constructed and maintained by p.Network. Users could deposit their GALA token into the contract, and receive the resulting pAsset, pGALA.

The lawsuit states that (i) pNetwork admitted that it mistakenly leaked a governance key when deploying this pGALA bridge, which such key was later used by an attacker to breach the pGALA contract on the BNB chain, (ii) the recovery plan presented and executed by pNetwork failed to recover the assets that were the subject of the attack and caused further harm; and (iii) despite pNetwork's assurances that action needed to be taken immediately, despite the systemic risk such action presented. Gala asserts that pNetwork sought to increase the utilization of its platform by issuing pGALA, and pNetwork benefited from its association with Gala Games. Therefore, it owed Gala a duty of care to avoid causing harm to the company or tokens. When pNetwork breached this duty by negligently and recklessly causing a security breach, it caused damage to Gala through out-of-pocket costs of over $25 million to address the aftermath of the breach, and reputational harm due to the market disruption.

Further, the GALA tokens are an essential component of Gala's business. pNetwork was aware of the prospective economic advantage in the value of GALA tokens as the entire function of pGALA is tied to the utility of GALA tokens itself. When pNetwork negligently and recklessly caused a security breach and intentionally carried out a failed recovery plan that caused further harm, it negatively impacted the market's perception of Gala and the GALA tokens, damaged Gala's reputation, and caused harm to its relationships with exchanges. Gala is seeking $27,671,934.80 for the out-of-pocket costs due to the breach, additional compensation for injuries, punitive damages and other relief the court would deem just and equitable.

Below follows a breakdown of the events surrounding the pNetwork breach.

On Thursday November 3, pNetwork informed Gala that the contract on BNB Chain had been breached as a result of pNetwork engineers mistakenly leaving a key in the public GitHub repository. The breach had not been exploited at that time, but it was feared by pNetwork that an attacker could mint unlimited pGALA on the pNetwork pGALA contract at any time. pNetwork proposed a plan to deactivate the bridge and then emergency whitehat exploit their own contract. Gala and pNetwork then contacted exchanges to alert them to the breach and immediately suspend deposits and withdrawals of the BEP-20 all pGALA. Following this, pNetwork initiated their whitehat attack, which was supposed to last for 2-3 minutes. As Gala does not promote tokens directly, the company is not in contact with the vast majority of exchanges that listed either $GALA or the BEP-20 $pGALA on BNB Chain. Gala also contacted PancakeSwap and asked them to put a warning on the trading pair alerting people not to use it.

In a statement on November 5, 2022 (pGALA post-mortem: measures taken to safeguard the ecosystem from malicious actors and recovery plan | by pNetwork Team | pNetwork | Medium) pNetwork said that the company would return, in full, the BNB assets collected from the whitehat draining of the pool. In addition to individual victims losing money and exchanges being exposed to the exploited pGALA, the Ethereum-based $GALA Token suffered a negative reputational impact and corresponding decreases in liquidity and market depth. Later on November 11, 2022 pNetwork stated that they were unable to proceed with the recovery plan.

In the event that the suit succeeds, Gala has stated that any damages, less legal fees, will be converted to $GALA and burned. Gala is also aware of the damage that pNetwork's actions caused many other third-parties, and invites these other injured parties to contact the legal team at [email protected] about the potential to join the suit against pNetwork.

Gala is a Web3 games company that uses decentralization, player ownership and reward economies to create a revolutionary new way of gaming. With dozens of games on the horizon and several already in various stages of presale or beta play, Gala is quickly becoming the world leaders in own-your-experience gaming. Learn more at Gala.com.

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SOURCE Gala Games