Original Author: Nancy, PANews
Recently, Jake Browatzke, the founder of Magic Book, revealed on social media that the Gala Games team, a blockchain gaming platform, is embroiled in internal disputes. Founder and CEO Eric Schiermeyer and co-founder Write Thurston have filed lawsuits against each other, accusing each other of "coin theft and market manipulation" and "misuse of funds", with $GALA assets involved valued at up to $730 million.
Later, Gala Games President Jason Brink confirmed the internal dispute in a post and stated that he will not comment on the ongoing litigation. He is committed to transparency and encourages everyone to read the complaints filed by the two co-founders in their entirety, as well as engage in further discussions. So, what information is revealed in these two lawsuits? And what are the points worth paying attention to?
Eric Schiermeyer accused of destroying tokens worth over $600 million and secretly founding a competing company
Before we start, let's first understand the background of Gala Games. Gala Games is a blockchain video game and entertainment company with annual revenue reaching millions of dollars and hundreds of employees. According to the initial agreement, Eric Schiermeyer and Write Thurston will share all business opportunities in a 50:50 ratio, and the control of the company is authorized by the two directors.
On August 31, Eric Schiermeyer and Write Thurston filed lawsuits against each other in a Utah state court in the United States. Write Thurston, on behalf of True North, an investment company located in Wasatch County, Utah, and a shareholder of Gala Games' parent company, Blockchain Game Partners (BGP), holding 44.762% of the shares, accused Eric Schiermeyer. Eric Schiermeyer has been the President of BGP since 2009.
Write Thurston pointed out in this lawsuit that after the initial allocation of token $GALA, True North and Eric Schiermeyer obtained any remaining and additional Gala and NFT and stored them in a wallet controlled solely by the latter. However, without board or shareholder approval or knowledge, Eric Schiermeyer destroyed over $600 million worth of $GALA tokens belonging to its shareholders and other members of the Gala community, wasting millions of dollars of company assets. Furthermore, Eric Schiermeyer did not upgrade the $GALA token as stated in the public announcement, but instead transferred it to a personal controlled wallet. Not only that, Eric Schiermeyer also borrowed millions of dollars from Gala Games for personal use, such as using $5 million to purchase a company plane in installments, and created offshore entities in Switzerland and Dubai that should have belonged to Gala Games privately, usurping business opportunities that should have belonged to BGP and unilaterally making himself the controlling shareholder. He also provided severely incomplete or inaccurate financial information and did not provide necessary company records to True North.
In addition, this lawsuit also points out that Eric Schiermeyer has already or intends to transfer or use a majority of BGP's current business, technological platforms, assets, and intellectual property. For example, he recently announced the allocation of 8000 nodes to BGP employees and the shutdown of True North's nodes, which will generate valuable digital assets. However, Eric Schiermeyer's decision to do so without disclosing and obtaining approval from the board or shareholders will harm shareholder interests and company value. Prior to this, Eric Schiermeyer also unilaterally shut down True North's nodes.
Write Thurston accused Eric Schiermeyer of misconduct, mismanagement, and self-dealing, which caused billions of dollars in losses to the reputation and shareholder assets of BGP. He violated his fiduciary duties and rejected all good-faith negotiations. Considering that BGP requires a two-thirds majority vote, and there are only two major shareholders, True North and Eric Schiermeyer, Write Thurston hopes that this lawsuit will remove him from his positions as director, president, and CEO, and provide no less than $600 million in damages, as well as compliance with the terms of the founder's agreement.
Write Thurston accused of stealing and selling over $130 million worth of GALA tokens, and not participating in company operations for many years
On the other hand, Eric Schiermeyer stated in another lawsuit that Write Thurston and True North stole over 8.64 billion $GALA tokens (approximately 20% of the total supply at the time) from Gala Game and claimed to have placed them in a secure wallet for the benefit of the company. However, he is suspected of transferring and selling approximately $130 million worth of $GALA tokens (about half of the stolen assets). At the same time, Write Thurston also stole licenses to operate "nodes" in the Gala ecosystem and sold them to others, manipulating the nodes to earn $GALA tokens for himself or True North. They have been sued by the buyers of the stolen tokens. It is worth mentioning that earlier this year, the US SEC sued Write Thurston and True North for fraudulent activities related to the energy-saving cryptocurrency company "Green Boxes".
Eric Schiermeyer also pointed out in the lawsuit that although Write Thurston has founded many companies, most of them have eventually been involved in lawsuits, bankruptcy, or lawsuits filed by the US SEC. Gala Games seems to be his only legitimate enterprise. In terms of company operations, apart from guiding the company's annual tax returns, Write Thurston has not been involved in the company's day-to-day operations for many years and is an absentee director who recently resigned. In the past few years, the company has been working to resolve the issues left behind by Write Thurston in the early days. Due to the previous discovery of Write Thurston's stolen behavior, it was believed that contacting the authorities or filing a lawsuit at that time might result in the liquidation of the stolen GALA. Therefore, the company had no choice but to rely on his statement, considering him as the custodian of GALA. However, from Write Thurston's secret sale of assets and his prevention of the company from recovering the stolen assets, it can be seen that his only response was to sell some assets to buy firearms and ammunition. There is no other response, and the claim of protecting the security of the company's $GALA assets is false.
In addition, the lawsuit also reveals the risk of centralization in the Gala Games nodes. Write Thurston (or companies under his control) and Eric Schiermeyer each obtained 7,000 Gala Nodes at the beginning of Gala Games. However, both co-founders agreed not to operate these nodes, as the centralization of these nodes would go against the company's fundamental goal of decentralization.
Eric Schiermeyer believes that Write Thurston's fraudulent behavior has caused significant damage to the reputation and brand of Gala Games, such as Coinbase refusing to support the GALA v2 upgrade after the SEC lawsuit. He requests the court to make a judgment against Write Thurston and True North, and requests the court to order the defendants to return and compensate for any profits from the stolen value of millions of $GALA, and to remove them as directors of the company and compensate for all litigation and legal expenses.
Token drops by over 97% and will fully migrate to GalaChain by the end of the year
The internal disputes within the Gala Games team have also caused community panic. According to CoinGeoko data, as of September 4th, the price of Gala Games token $GALA has dropped by over 97.9% from its highest point, with a current total market value of approximately $430 million, much lower than the mentioned $730 million GALA assets in the lawsuit, a decline of over 16% since the lawsuit.
According to the latest update from Gala Games, the project plans to fully migrate the Gala platform to GalaChain by the end of the year, and simplify the user threshold and development tools to provide comprehensive self-service to external teams by the end of the year. In addition, the social media platform Rep, built on GalaChain, has entered the QA phase after migration from NEAR. Furthermore, Gala Games' subsidiary games have not been affected by the lawsuit, with multiple projects making positive progress. According to official disclosure, the first-week downloads of the 3A game Champions Arena exceeded 70,000, with a conversion rate of 10% from Web2 to Web3 users; the social poker game PokerGO has launched an iOS version; the blockchain game Town Star will soon release a roadmap and token economic model.
From the content of the two lawsuits mentioned above, issues such as misuse of company funds and node resources, poor management, and improper business conduct fully expose the centralized governance and transparency problems of Gala Games, highlighting the necessity of decentralized governance. "When gods fight, the investors suffer," although the internal disputes of Gala Games have not yet reached a conclusion, investors are the ones paying for the project's governance mistakes.
