What information does the lawsuit reveal about the two co-founders of Gala Games?

What does the lawsuit reveal about Gala Games' co-founders?

Recently, Jake Browatzke, the founder of Magic Book, revealed on social media that there is an internal conflict within the blockchain gaming platform Gala Games. The founder and CEO, Eric Schiermeyer, and co-founder Write Thurston have filed lawsuits against each other, accusing each other of “coin theft” and “misuse of funds,” involving a total value of $730 million in assets.

Later, Jason Brink, the President of Gala Games, confirmed the internal dispute in a post and stated that he would not comment on the ongoing litigation. He adheres to the principle of transparency and encourages everyone to read the complaints filed by the two co-founders in their entirety, and welcomes further discussions. So, what information is revealed in these two lawsuits? And what are the points worth noting?

Eric Schiermeyer accused of destroying tokens worth over $600 million and secretly launching a competing company

Before we begin, let’s understand the background of Gala Games. Gala Games is a blockchain video game and entertainment company with annual revenue in the millions of dollars and hundreds of employees. According to the initial agreement, Eric Schiermeyer and Write Thurston were supposed to share all business opportunities on a 50:50 basis, and the control of the company was authorized by the two directors.

On August 31, Eric Schiermeyer and Write Thurston filed lawsuits against each other in a Utah state court in the United States. Write Thurston, on behalf of True North, an investment company located in Wasatch County, Utah, and a shareholder of Gala Games’ parent company, Blockchain Game LianGuairtners (BGP), holding 44.762% of the shares, accused Eric Schiermeyer. Eric Schiermeyer has been the President of BGP since 2009.

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In this complaint, Write Thurston pointed out that after the initial distribution of the $GALA tokens, any remaining and additional Gala and NFT tokens obtained by True North and Eric Schiermeyer were stored in a wallet controlled solely by the latter. However, without the approval or knowledge of the board of directors or shareholders, Eric Schiermeyer destroyed over $600 million worth of GALA tokens belonging to shareholders and other members of the Gala community and wasted millions of dollars of company assets. He even transferred the $GALA tokens to his personal control wallet instead of upgrading them as stated in the public statement. Moreover, Eric Schiermeyer borrowed millions of dollars from Gala Games for personal use, such as paying $5 million in installments to purchase a company plane, and secretly created offshore entities in Switzerland and Dubai that should have belonged to Gala Games. He unilaterally appointed himself as the controlling shareholder, seizing business opportunities that should have belonged to BGP. He also provided severely incomplete or incorrect financial information and did not provide necessary company records to True North.

In addition, the lawsuit also pointed out that Eric Schiermeyer has already or intends to transfer or use the majority of BGP’s current business, technical platforms, assets, and intellectual property. For example, he recently announced the allocation of 8,000 nodes to BGP employees and the closure of True North’s nodes, which will generate valuable digital assets. However, Eric Schiermeyer made this decision without disclosing and obtaining approval from the board of directors or shareholders, which will harm the interests of shareholders and the company’s value. Prior to this, Eric Schiermeyer had also privately closed True North’s nodes.

Write Thurston claims that Eric Schiermeyer’s dereliction of duty, mismanagement, and self-dealing have caused hundreds of millions of dollars in losses to BGP’s reputation and shareholder assets. He has violated his fiduciary duties and refused all goodwill negotiations. Considering that BGP requires a 2/3 majority vote and only True North and Eric Schiermeyer are major shareholders, Write Thurston hopes to remove him from his positions as director, president, and CEO through this lawsuit, and provide no less than $600 million in damages, as well as comply with the terms of the founder agreement injunction.

Write Thurston accused of stealing and selling over $130 million worth of GALA tokens, not involved in company operations for years

In another lawsuit, Eric Schiermeyer pointed out that Write Thurston and True North stole over 8.64 billion $GALA tokens (about 20% of the total GALA tokens issued at the time) from Gala Game and claimed to have placed them in a secure wallet for the company’s benefit. However, he is suspected of transferring and selling approximately $130 million worth of $GALA tokens (about half of the stolen assets). At the same time, Write Thurston also sold licenses for operating “nodes” on the Gala ecosystem to others and manipulated the nodes to earn GALA tokens for himself or True North, and they have been sued by the buyers of the stolen tokens. It is worth mentioning that earlier this year, the U.S. SEC sued Write Thurston and True North for fraudulent activities related to energy-efficient cryptocurrency company “Green Boxes”.

Eric Schiermeyer also pointed out in the lawsuit that although Write Thurston has founded many companies, most of them have ended up in litigation, bankruptcy, or being sued by the U.S. SEC. Gala Games seems to be his only legitimate enterprise. In terms of company operations, besides guiding the company’s annual tax returns, Write Thurston has not been involved in the company’s day-to-day operations for many years. He is an absentee director and recently resigned. Over the past few years, the company has been working to address the problems left by Write Thurston in the early days. After discovering Write Thurston’s theft, it was believed that contacting the authorities or filing a lawsuit at that time might lead to the liquidation of the stolen GALA. Therefore, the company had no choice but to rely on his statement, treating him as the custodian of GALA. However, based on Write Thurston’s secret sale of assets and prevention of the company from recovering the stolen assets, his only response was to sell some assets to buy firearms and ammunition. Therefore, the claim that he was protecting the security of the company’s $GALA assets is false.

In addition, the lawsuit also revealed the centralized risk of Gala Games nodes. Write Thurston (or his controlled company) and Eric Schiermeyer each obtained 7,000 Gala Nodes in the early stages of Gala Games. However, both co-founders agreed not to operate these nodes because the centralization of these nodes would go against the company’s fundamental goal of decentralization.

Eric Schiermeyer believes that Write Thurston’s fraudulent behavior has caused significant damage to the reputation and brand of Gala Games. For example, after Coinbase refused to support the GALA v2 upgrade following the SEC’s lawsuit, he requested the court to make a judgment against Write Thurston and True North, and requested the court to order the defendants to return and compensate for any profits from the stolen millions of $GALA, remove them from the company’s board of directors, and compensate for all litigation and legal expenses.

Token Drops Over 97% from Its Peak, Full Migration to GalaChain by the End of the Year

The internal strife within the Gala Games team has also caused panic in the community. According to CoinGeoko data, as of September 4th, the price of Gala Games token $GALA has dropped over 97.9% from its highest point, with a current total market value of about $430 million, far below the mentioned $730 million GALA assets in the lawsuit, and a drop of over 16% from the time of the lawsuit.

According to the latest update from Gala Games, the project will fully migrate the Gala platform to GalaChain by the end of the year, and simplify the access threshold and development tools to provide comprehensive self-service for external teams before the year-end. In addition, the social media platform Rep, built on GalaChain, has entered the QA stage of migration from NEAR. Furthermore, Gala Games’ games have not been affected by the lawsuit, and multiple projects have made positive progress. According to official disclosures, the mobile game Champions Arena has exceeded 70,000 downloads in the first week, with a Web2 to Web3 conversion rate of 10%; the social poker game PokerGO has launched its iOS version; and the blockchain game Town Star is about to release its roadmap and token economic model.

From the content of the above two lawsuits, the misuse and misappropriation of company funds and node resources, poor management of the company, and improper business practices all expose the centralization and transparency issues in the governance of Gala Games, highlighting the necessity of decentralized governance. Although this internal dispute within Gala Games has not yet been concluded, investors are the ones who have to pay for the project’s governance mistakes.

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