The lawsuit stems from a million-dollar exploit in November 2022 that allegedly took place due to a private key leak.
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On March 20, GameFi project Gala Games announced it had recently filed a lawsuit against pNetwork, the cross-chain interoperability bridge used by Gala on the BNB Smart Chain. In November 2022, Gala Games was exploited after an unauthorized wallet address minted over $2 billion in GALA (GALA) and dumped the tokens on PancakeSwap, draining $4.5 million from the liquidity pool and causing a substantial plunge in GALA’s token price.
The lawsuit alleges that the incident was the result of “negligence and tortious interference” from pNetwork. On Nov. 7, 2022, blockchain analytics platform SlowMist alleged that the incident may have stemmed from a plain text private key leak in one of three pNetwork affiliated smart contracts on Gala. The leaked private key, as told by SlowMist, was publicly viewable on GitHub.
In a statement to Cointelegraph, a representative for pNetwork stated:
The representative said the report includes full conversations and relevant documentation and alleged that the Gala Games team deleted messages in “their 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 firmly believe that the truth will come to light.” Shortly after the incident, pNetwork claimed that its activity during the exploit was a “white hat move.” The statement has been challenged by cryptocurrency exchange Huobi Global.
Gala Games claims the alleged breach led to over $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.”
In a post-mortem analysis dated Nov. 5, 2022, pNetwork stated that a “misconfiguration of the pNetwork-powered bridge for the GALA token” was noticed by the developer team and that “the ownership of the pGALA smart contract (deployed on BSC) had been covertly taken over due to the misconfiguration”:
Furthermore, pNetwork wrote:
Gala also alleged that on Nov. 5, 2022, pNetwork devised a plan to return in full “the BNB assets collected from the whitehat draining of the pool” but allegedly did not proceed with the plan in a follow-up on Nov. 11, 2022. In a Telegram post, pNetwork said the first part of its recovery plan involving GALA tokens “has been completed” but the second part involving BNB (BNB) tokens “is still on hold.”
None of the allegations have been substantiated in a court of law. PNetwork stated that it “will continue to work closely with the Swiss authorities and provide any further information as needed in order to resolve this issue in the best interests of all parties involved.”
