GameFi project Gala files $28M lawsuit against pNetwork

GameFi project Gala files $28M lawsuit against pNetwork

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On March 20, the GameFi Gala Games project Announced He had recently filed a lawsuit against pNetwork, the cross-chain interoperability bridge used by Gala in the BNB Smart Chain. Last November, Gala Games was exploited after an unauthorized wallet address minted over $2 billion in GALA and dumped the tokens on PancakeSwap, draining $4.5 million of the liquidity pool and causing a substantial drop in the price of the game. GALA token.

The lawsuit alleges that the incident was the result of “negligence and tortious interference” by pNetwork. On November 7, 2022, the SlowMist blockchain analytics platform alleged that the incident may have arisen from a plaintext private key leak in one of the three pNetwork-affiliated smart contracts in Gala. The leaked private key, according to what SlowMist said, was publicly viewable on GitHub.

“The lawsuit states that (i) pNetwork admitted that it mistakenly leaked a governance key when implementing this pGALA bridge, which key was later used by an attacker to breach the pGALA contract on the BNB chain, […]”

In a statement to Cointelegraph, a pNetwork representative stated:

“As a pNetwork team, we would like to express our genuine surprise and concern to hear the recent announcement by the GALA Games Project to sue pNetwork. We would like to clarify that, three months ago, we had already submitted a full report to the Swiss authorities detailing all the incident”.

The representative said the report included full conversations and relevant documentation, and alleged that the Gala Games team removed messages in “its role in planning, supporting and communicating the so-called white hat intervention.” pNetwork reiterated: “We have been fully transparent and cooperative with the authorities in this matter, and we strongly believe that the truth will come out.” Shortly after the incident, pNetwork claimed that its activity during exploitation it was a “white hat movement”. The statement has been disputed by the Huobi Global cryptocurrency exchange.

Gala Games claims that the alleged breach resulted in more than $25 million in damages and is seeking $27.7 million from pNetwork for “out-of-pocket costs due to the breach, additional compensation for injuries, punitive damages, and other relief.”

“Should the lawsuit succeed, Gala has stated that all damages, less legal fees, will be converted to $GALA and burned. Gala is also aware of the harm pNetwork’s actions caused to many other third parties, and invites to these others the injured parties contact the legal team”

In a postmortem analysis dated November 5, 2022, pNetwork fixed that the developer team noticed an “incorrect configuration of the pNetwork-powered bridge for the GALA token” and that “ownership of the pGALA smart contract (implemented in BSC) had been covertly taken over due to the incorrect configuration:”

“Loss of ownership over the token smart contract opens up the possibility for the attacker to hoard new tokens and alter pGALA at will.”

Furthermore, pNetwork wrote:

In reality, whoever currently retains ownership of that smart contract (henceforth, the “attacker”) did not perform any hack, but the situation highlighted a high security risk that had to be mitigated immediately.

Gala also alleged that on November 5, 2022, pNetwork devised a plan to return in full “the BNB assets collected from the pool’s whitehat drain,” but allegedly failed to proceed with the plan in a follow-up on November 11. , 2022. In a Telegram post, pNetwork said that the first part of its recovery plan involving GALA tokens “has been completed,” but the second part involving BNB tokens is “still on hold.”

We had a first meeting with the Swiss authorities (“Ministero Pubblico” from Lugano, Switzerland) to discuss the incident on February 8th. The discussion is still ongoing and we expect some progress to be made in the coming weeks.

None of the accusations have been substantiated in a court of law. pNetwork stated that it “will continue to work closely with the Swiss authorities and provide further information as necessary to resolve this issue in the best interest of all parties involved.”