In general I try my best to take a positive attitude, even towards those companies who I think are consistently doing the wrong thing.
That’s been difficult to sustain over the past 12 months when it comes to many doings of Gala Games but today’s news feels like a vindication of my previous comments — notably “Gala’s pattern of announcements over actuality” — although the truth appears to be both embarrassingly prosaic and incredibly self-centred.
For the news is that the two founders are suing each other, with the initial set of court documents alleging some eye-watering activities.
In one corner sits Eric Schiermeyer — one of six co-founders of Zynga — who is suing his fellow Gala co-founder Wright Thurston for stealing and then selling at least $130 million-worth of GALA tokens.
Of course, Thurston has a very different view on the matter.
For me, however, one of the most puzzling aspects of the entire case is why Schiermeyer ever got involved with Thurston in the first place.
Given his credientals in the game industry — and the activity of other Zynga co-founders such as Mark Pincus and Justin Waldron in the blockchain space — I would have thought Schiermeyer would have had plenty of more obvious potential co-founders than a man who according to the complaint has, over the past 20 years, founded numerous marketing and sales companies, “most of which have ended up in litigation, insolvent, bankrupt, and/or sued by the SEC”.
As an example, the SEC is currently suing Thurston (and others) for selling $18 million-worth of tokens and nodes in the fraudulent Green blockchain project, which started in 2018.
It seems likely that Thurston’s seeming expertise and success with blockchain — he also ran a (failed) Bitcoin mining company in 2017 — somehow convinced Schiermeyer he was a valuable contact in this field. Until recently, Thurston’s role was as Gala’s Chief Blockchain Officer.
The court document notes;
“Thurston is a person who comes across as earnest and convincing. He does favors for people. In online profile pictures, he often appears cuddling his wife. He calls himself a “dedicated member of his community” who “frequently volunteers with his church.” This persona has enabled him to fool many people, at least initially, and he has enriched himself through his pattern of deception.”
It adds — almost humorously to my non-legal reading — that when Gala Games was founded in 2019, Schiermeyer “was not aware of Thurston’s history of litigation, failed companies, and alleged fraud”.
It’s also worth noting that the Green blockchain and Gala were similar in that they were based on Ethereum in terms of their base tokens but they also sold expensive ‘nodes’, which were somehow part of their infrastructure, through which owners ‘mined’ the native tokens.
These nodes were one of the aspects of Gala that always worried me because I couldn’t see any technical reason for them. It seemed to be purely about making more money.
And Schiermeyer’s court document allege that in the early days of Gala, it did in fact operate in a similar way to Thurston’s previous multi-level marketing businesses, in particular when it came to the sale to nodes, adding…
“Indeed, much of the Company’s effort over the past several years has been to move away from problematic ideas or structures implemented by Thurston in the early days of the Company.”
But perhaps the most interesting single aspect of the case is the light it sheds on Gala’s decision to fork its native token in April 2023. At the time this was explained as being due to “enhanced burn mechanisms, security enhancements, and future upgradeability”, something I said that almost left me lost for words.
Now we know the truth was that this was purely a move to reissue the token supply to ensure the tokens Thurston was alleged to have stolen and not yet sold would be worthless. As an aside, it’s claimed that at this point Coinbase did its own due diligence in Thurston — who was embroiled in another related lawsuit — and hence refused to support Gala tokens or the reissuing process. Another mystery solved.
As for Thurston’s counter-suit, to my reading, it’s a less nuanced, more embittered argument.
It alleges Schiermeyer enriched himself to the detriment of Gala Games as a company and Thurston as a co-owner in terms of the way Schiermeyer is alleged to have controlled various assets, started various new subsidiaries and decided to reissue the Gala token and burn large quantities of it without seeking wider approval.
One standout passage alleges Schiermeyer spend $5 million on a down payment for a private jet. Notably, the lawsuit also alleges that the reissuing of the Gala tokens cost Thurston $151 million.
For the underlying context of these lawsuits was the incredible success of Gala Games, as a speculative blockchain project, at least in the period Q3 2021 to Q2 2022 when it was one of the best performing crypto tokens ever, ending with a peak market cap of over $4 billion.
If you timed it right, and you could have made millions, which is why — even with the token price down 98% from its all-time high — its co-founders are still arguing over hundreds of millions of dollars.
But perhaps the most stark aspect of this whole imbroglio is the fact that when Gala Games was set up, its bylaws required a 2/3 majority vote for the board to act but the company only had two equal shareholders; Eric Schiermeyer and Wright Thurston.
In other words, no matter what else happened — and clearly plenty of bad things did — the seeds of its decline and fail were baked in from the beginning.
This Substack is sponsored by Hiro Capital: investing in the future of gaming
Calendar
Martian Premiere League launches head-to-head matches — 6th September
Rift opens in Yuga’s HV-MTL Forge — 7th September
Wreck League’s box open and game launch — 14th September
Zeedz launches its public alpha — 5th October
Additional Links
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