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pNetwork Sues for $28 Million in Damages

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Gala Games, the company behind the GameFi project, revealed on March 20 that it had just begun legal action against pNetwork, demanding $28 million from them. Gala used this cross-interoperability bridge on BNB Smart Chain.

The case started due to a $1 million scam that reportedly took place in November 2022 due to a private key hack.

Gala Games was hacked in November 2022 when an illegal wallet address generated over $2 billion in GALA tokens and dumped it on PancakeSwap. This caused a significant drop in the price of the GALA tokens and drained $4.5 million from the liquidity pool.

pNetwork, in a recent statement, described their shock at Gala’s latest move.

According to a post-mortem study published by pNetwork on November 5, 2022, the development team discovered “a misconfiguration of the pNetwork-supported bridge for GALA code”. As a result, ownership of the pGALA smart contract (posted on BSC) was surreptitiously seized.

If an attacker loses control of a token’s smart contract, it may generate new tokens or make arbitrary changes to pGALA.

On November 5, 2022, Gala claimed that pNetwork planned to redeem all collected BNB assets by draining the pool’s white hat. However, on November 11, 2022, the company abandoned those plans. pNetwork claimed in a Telegram message that the first phase of their redemption plan, including GALA tokens, has been completed, while the second phase, involving BNB tokens, has been put on hold.

Gala: negligence of pNetwork led to the hack

According to the allegations in the complaint, this occurred as a direct result of “negligence and malicious interference” on the part of pNetwork. Blockchain analytics platform SlowMist said on November 7, 2022, that this event may have been caused by a plaintext private key breach in one of the three smart contracts connected to Gala’s pNetwork. According to SlowMist, anyone on GitHub could see the compromised private key.

According to the representative, the report contains full discussions and relevant documents. The representative also alleged that the Gala Games team scanned scripts as part of their involvement in organizing, supporting and publishing the so-called white hat intervention.

In a statement released shortly after the event, pNetwork said its actions during the exploit constituted a “white hat maneuver”. Cryptocurrency exchange Huobi Global has raised concerns about the authenticity of the announcement.

Gala Games is seeking $27.7 million from pNetwork for “personal expenses related to the infringement, additional injury compensation, punitive penalties, and other remedies” after claiming that the alleged infringement cost the company more than $25 million.

The company announced that any damages, minus legal expenses, would be converted to $GALA and burned if the litigation was successful. Gala also understands that pNetwork’s activities have harmed several additional third parties and encourages any such parties to contact the company’s legal representatives pursuant to the company’s charges.

The claims have not been substantiated in a legal framework. PNetwork has promised to work closely with the Swiss authorities and provide any additional information required to address this issue in the best interests of all parties involved.

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