Gala Games Faces Internal Control Failure Leading to $200 Million Token Exploit

Gala Games Faces Internal Control Failure Leading to $200 Million Token Exploit

Table of Contents

Gala Games experienced a significant security breach due to internal control failures, resulting in the minting and unauthorized sale of $29 million worth of GALA tokens.

Security Breach Shakes Gala 

Gala Games, a blockchain gaming startup co-founded by Zynga's Eric Schiermeyer, has experienced a major security breach involving its GALA tokens. The incident, revealed in an X post on May 21, resulted in a significant financial loss.

“This was an isolated incident, the cause of which has been addressed, and we are working closely with law enforcement to investigate the individuals behind the breach.”  

On Monday, blockchain explorers detected an unknown entity minting 5 billion GALA tokens, valued at approximately $200 million. The attacker managed to sell 600 million of these tokens on the decentralized exchange Uniswap before Gala Games froze the compromised wallet, making the remaining 4.4 billion tokens unsellable and effectively burning them.

Slow Initial Response and Investigation

0xQuit, a smart contract developer and security auditor, first flagged the suspicious activity on Twitter. Initially, Gala Games did not announce the activity, nor did the team provide any explanation on its Discord server, leading to fears of a hack.

In a subsequent statement, CEO Eric Schiermeyer admitted to internal control failures. 

"We messed up our internal controls… This shouldn’t have happened, and we are taking steps to ensure it doesn’t ever again. We believe we have identified the culprit, and we are currently working with the FBI, DOJ, and a network of international authorities."

He also revealed that the company is working closely with law enforcement agencies like the FBI and the U.S. Department of Justice, as well as other international entities to track down the exploiter. 

Impact on GALA Token

The breach caused a sharp decline in the value of the GALA token. Amid the fear and uncertainty caused, in part, by the team's initial silence, GALA's price dropped 20%, from around $0.048 to $0.038, according to CoinGecko. The attacker profited approximately $29 million from the exploit. However, GALA’s price has since recovered to about $0.04, helped by a broader market upswing, including a 20% increase in Ethereum’s price.

Schiermeyer reassured the community that the company's primary Ethereum contract for GALA remains secure. 

"Our ETH contract for $GALA is secure and under the protection of a multi-sig wallet. It was never compromised." 

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice. 

Investment Disclaimer
Related Topics: 

You may like