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Gala Games, the company behind the GameFi project, revealed on March 20 that it had just initiated legal action against pNetwork, demanding $28 million from them. Gala used this cross-chain interoperability bridge on the BNB Smart Chain.
The case was initiated due to a million-dollar scam that reportedly took place in November 2022 due to a private key being compromised.
Gala Games was compromised in November 2022 when an illegal wallet address produced over $2 billion in GALA tokens and dumped them on PancakeSwap. This caused a significant drop in the price of GALA tokens and drained $4.5 million from the liquidity pool.
pNetwork, in a recent statement, described their shock at Gala’s recent move.
1/4 We would like to express our genuine surprise & concern upon hearing the recent announcement by GALA Games to sue pNetwork. We would like to clarify that, three months ago, we had already submitted a comprehensive report to the Swiss authorities detailing the entire incident.
— pNetwork 🦜 (@pNetworkDeFi) March 20, 2023
According to a postmortem study published by pNetwork on November 5, 2022, the development team discovered a “misconfiguration of the pNetwork-powered bridge for the GALA token.” As a result, the ownership of the pGALA smart contract (deployed on BSC) had been surreptitiously taken over.
If an attacker loses control of the token smart contract, they might create new tokens or make arbitrary changes to pGALA.
On November 5, 2022, Gala claimed that pNetwork had planned to refund all of the BNB assets gathered through the whitehat draining of the pool. However, on November 11, 2022, the company abandoned those plans. pNetwork claimed in a Telegram message that the first stage of their recovery plan, including GALA tokens, was accomplished, while the second stage, involving BNB tokens, was on hold.
Gala: pNetwork’s negligence led to the hack
According to the allegations made in the complaint, the occurrence occurred as a direct consequence of “negligence and tortious interference” on the part of pNetwork. The blockchain analytics platform SlowMist said on November 7, 2022, that the event might have been caused by a plain text private key breach in one of the three pNetwork connected smart contracts on Gala. According to SlowMist, anybody on GitHub might see the compromised private key.
According to the representative, the report contains entire discussions and pertinent documents. The representative also alleged that the Gala Games team erased texts as part of their participation in organizing, supporting, and disseminating the so-called white hat intervention.
In a statement issued not long after the event, pNetwork said that its actions during the exploit constituted a “white hat maneuver.” The cryptocurrency exchange Huobi Global has raised concerns about the validity of the announcement.
Gala Games is demanding $27.7 million in damages from pNetwork for “out-of-pocket expenditures related to the breach, further compensation for injuries, punitive penalties, and other remedies” after claiming the alleged breach cost the company more than $25 million.
The firm has declared that any damages, minus legal expenses, will be converted to $GALA and burnt if the litigation is successful. Gala is also aware that pNetwork’s activities harmed numerous additional third parties and encourages any such parties to contact the firm’s legal representatives according to the firm’s accusations.
The claims have not been proven in a legal setting. PNetwork has promised to operate closely with the Swiss authorities and offer any more information required to address this problem in the best interests of all parties concerned.