On August 31st, two co-founders of Gala Games, the play-to-earn (P2E) crypto gaming company, took their business disagreements to court. Filed in the Utah District Court, Eric Schiermeyer and Wright Thurston’s lawsuits against each other devalued their games’ native token, GALA, in the process.
Since the public took note of the upcoming legal battle, Gala (GALA) took a -20% dive over the week, evaporating $88 million from last Thursday’s $462 million market cap.
Having launched in early 2019, Gala Games has been a prolific blockchain gaming company. GALA tokens monetize their play-to-earn (P2E) games. In addition to being a governance token, players can earn GALA by completing in-game quests.
Alongside trading tokens on exchanges for real money, P2E players can use GALA to purchase in-game items, evolve tokenized creatures as NFTs, and access NFT auctions on Gala Games Marketplace.
Gala Games has covered most gaming genres, from battle royale GRIT to Town Star farming simulator and even innovative 4x strategy/RPG hybrid Eternal Paradox. All these games are underpinned by GALA monetization and will likely suffer.
Gala Games Feud: Schiermeyer Side
The current CEO of Gala Games, Eric Schiermeyer, believes that his co-founder, Wright Thurston, is having a conflict of interest. Namely, Thurston siphoned $130 million worth of GALA tokens in early 2021 on behalf of his investment firm True North United.
According to Schiermeyer’s lawsuit, Thurston transferred funds to 43 wallets from the official Gala Games token wallet. From September 2022 to May 2023, Thurston allegedly committed convoluted GALA transactions to offload them on exchanges.
When Schiermeyer first confronted Thurston, he acknowledged the portion of sales, some of which were used “to purchase ammunition for firearms.” In a later communication, Thurston framed the GALA token drain not as theft but as legal property retrieval.
Schiermeyer further alleges that Thurston illegally sold Gala Games node licenses and kept all the profits. Gala Games nodes underpin the entire ecosystem, processing all P2E transactions, divided into Founder’s Nodes and Reputation (REP) Nodes. Licenses themselves are non-fungible tokens (NFTs), permitting node operators to become a part of the network.
Gala Games Feud: Thurston Side
On the same day at the same court, Thurston filed a lawsuit against Schiermeyer on behalf of his investment firm True North United Investments LLC. Thurston’s company also represents Blockchain Game Partners (BGP), to which he serves as director, on behalf of Gala Games investors.
Thurston’s allegations appear more severe, accusing Schiermeyer of “corporate waste, conversion, and unjust enrichment.” Specifically, Schiermeyer conducted elaborate schemes without going through proper company channels.
“Over the last twelve (12) months, Schiermeyer has exercised unilateral control over the operations, assets, and profits of BGP.”
Utah District Court filing via Pacer
Thurston’s True North has a 44.7% stake in BGP, alleging that Schiermeyer’s actions severely damaged the company. Some of this “unilateral control” made BGP burn $600 million worth of GALA tokens. At the same time, Schiermeyer allegedly used BGP funds for personal loans and gain.
Schiermeyer established legal entities in Switzerland and Dubai to gain a controlling shareholder position. All the while, Thurston had no idea what Schiermeyer was up to as he obfuscated financial records.
Web3 Gaming’s Continued Failure to Launch
With allegations so severe on both sides, it appears that Gala Games will unwind as a Web3 blockchain gaming platform. Whether Schiermeyer or Thurston is proven correct, Gala Games management is reminiscent of post-mortem FTX, showing a severe lack of governance and transparency.
Technically, Gala Games runs a decentralized network where players and developers can run nodes. With GALA tokens, they have a say in how the platform is developed and managed. Of the maximum 50 billion GALA, of which 23.4B is in circulation, half is distributed to Founder’s Nodes and the other half to the Gala Games Conservatorship (GGC).
GGC holds a treasury wallet that was purportedly the target of Thurston’s token drain. Yet, tokenization appears to be just one layer of traditional corporate malfeasance.
According to Polaris Market Research, blockchain gaming grew to a $5.41 billion market in 2022. Comparatively, the traditional video gaming market was $294.6 billion. Moreover, after much metaverse hype, big companies have turned away from the metaverse and shifted their focus to AI.
ApeCoin (APE) is the clearest indicator of this shift, having lost -96% of value from its ATH in March 2022. In April of that year, ApeCoin overshadowed both Decentraland and The Sandbox, which still hold minimal engagement.
This article originally appeared on The Tokenist
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