--News Direct--
Singapore / April 3, 2023 / Huobi announces that it has come up with a compensation plan together with Gala Games to offset the losses of pGALA incident victims on Huobi with up to US$50 million. According to this announcement, the compensation is shared by Huobi and Gala Games. Huobi will provide US$25 million in cash and user benefits, including 15 million USDT and 10mil equivalent equity compensation. Similarly, Gala Games will offer US$25 million worth of node licenses as compensation. The compensation plan is set to begin within the week.
The pGALA incident reportedly originated from pNetwork's collaboration with hackers in minting US$ 1 billion worth of pGALA tokens on the BNB chain before withdrawing them from the liquidity pool to improperly gain over US$10 million. However, the plummeting price of GALA on the BNB chain, coupled with pNetwork's intentional concealment for profit, caused huge losses to many third parties, including Gala Games and Huobi. pNetwork, the party responsible for the incident, claimed that it would airdrop to affected users the 12,977 BNB unfairly profited from their excessive issuance of pGALA tokens. However, the airdrops have not yet been delivered. Besides the compensation plan, Huobi and Gala Games have agreed to pursue legal action against pNetwork.
Huobi reveals the truth behind the pGALA incident and will partner with Gala Games to sue pNetwork
At 20:00 (UTC) on November 3, 2022, the multi-chain routing protocol pNetwork minted over $1 billion worth of pGALA tokens out of thin air on the BNB chain and sold them on PancakeSwap, causing the GALA tokens on the BNB chain to dive dramatically from $0.04 to $0.0000045.
Subsequently, the huge price difference between GALA tokens on the BNB chain and centralized exchanges attracted a large number of funds to buy these tokens on the BNB chain and deposit them to centralized exchanges for sale. Due to pNetwork's intentional concealment, Huobi, unaware of the situation, did not close the deposit channel in time, leading to a plunge in GALA's price on the platform from US$0.04 to US$0.0003. This resulted in significant losses for Huobi and its users.
Starting from 01:00 (UTC) on November 4, Huobi exhausted all means to recover user losses by issuing five consecutive announcements on the progress of handling the GALA token abnormality event. In stark contrast, pNetwork did not release the postmortem analysis until 2:00 in the morning of November 6. With this enormous amount of unjust gain, pNetwork has also failed to meet its promise to compensate the victim users' losses.
The analysis showed that the pNetwork team noticed a cross-chain bridge misconfiguration of the GALA tokens at 17:52 (UTC) on November 3. Because of this misconfiguration, ownership of the pGALA smart contract deployed on BSC was secretly taken over. It was a fund pool of $400,000, although the ownership attacker did not launch any attacks at the time, they did so later. At 19:11 (UTC), pNetwork contacted Gala Games and decided to suspend cross-chain bridge activity and drain the pGALA/BNB PancakeSwap pool through a white-hat action. At 20:13 (UTC), pNetwork issued 27,814,200,000 uncollateralized pGALA tokens to drain the pool before increasing another 27,814,200,000 uncollateralized pGALA tokens.
At 20:28 (UTC) on the same day, Gala Games and pNetwork tweeted about the issue, reminding community users not to buy GALA tokens on the BNB chain. After the persuasion failed, pNetwork continued to drain the pool at 20:29 (UTC), claiming to protect user funds from being attacked. At 22:16 (UTC), Gala Games and pNetwork stopped the draining. By then, pNetwork had recovered 12,977 BNB. Not until 23:03 (UTC) did Huobi close the depositing of GALA tokens on the BNB chain.
According to Huobi's Statement on the GALA incident, released at 11:03 (UTC) on November 6, the pNetwork team never intended to cause this attack by minting an astronomical amount of tokens. What's worse, pNetwork exploited the loophole on its own smart contract and issued 55.6 billion pGALA tokens to carry out the attack 50 minutes after contacting other exchanges, not leaving sufficient time for them to respond. A postmortem investigation revealed that the misconfiguration, or vulnerability, was caused by a pNetwork engineer mistakenly embedding a key in the smart contract 67 days ago, which subsequently led to this very incident. Huobi believes that pNetwork's action was not a "white hat" operation, but a malicious hack with profit as its ultimate goal, and the white hat operation was just an illegal excuse sought by the pNetwork team to avoid legal consequences.
The complete story of the incident has been pieced together finally. Ultimately, it was a result of pNetwork's negligence, tortious interference, and intentional concealment which led to many victims who suffered losses during the incident.
According to Cointelegraph, GameFi project Gala Games announced on March 20 that it had filed a lawsuit against pNetwork, the cross-chain interoperability bridge used by GALA on the BNB Smart Chain. Gala said the pGALA incident led to over $25 million in damages and are seeking $27.7 million from pNetwork for related damages and compensation. In the event that the suit succeeds, any damages, less legal fees, will be converted to $GALA and burned. In addition, Gala will invite other affected third parties to contact its legal team to jointly claim compensation.
Huobi has contacted Gala's legal team and will work together with Gala Games to file a lawsuit, recover losses, defend its reputation, and the interests of its users. More details will be released in Huobi's upcoming announcements.
Huobi will replace pGALA with ROCK to put user interests first
Huobi is committed to our users’ interests and constantly working to safeguard our users’ assets and interests first. Aside from issuing timely announcements and taking relevant measures to recover user losses, the platform has been actively communicating with pNetwork and Gala Games, and decided to seek legal actions to protect users’ rights. However, due to pNetwork's inaction, it has taken a significant time to pursue liability and compensation, which resulted in greater losses for the affected users and the platform.
In response to this, Huobi has also recently announced a strategic partnership with Gala Games on March 31 after four months of negotiations. Centered around the integration of the Gala Layer-1 public chain, both parties aim to provide premium investment and listing opportunities for top projects in the Gala ecosystem and will also join hands in terms of eco-construction, co-branding, project development, and community consensus building. In the meantime, they will leverage their ecosystems, resources, and brand influence to launch a compensation plan to recover user losses as soon as possible in order to maintain a positive brand reputation.
Regarding the upcoming compensation plan, the Huobi platform is planning to support the conversion of pGALA into a new token, ROCK (Rock Dao), and be the first to launch it after the conversion is complete. ROCK is a Web3 game token initiated by Gala Games in collaboration with Huobi and TRON. It has a total supply of about 6.02 billion, including a non-circulating supply of 1.4 billion in a reserve fund for Rock Dao, which is only used for governance and voting and held by Gala Games and Huobi equally. More details will be covered in an upcoming official announcement.
Huobi and Gala Games have demonstrated their responsibility and commitment to protecting user interests by compensating for pGALA-related losses. We hope that more exchanges and project teams are willing to take responsibility and defend user interests will emerge in the crypto industry and working together for a better crypto world.
About Huobi
Founded in 2013, Huobi has evolved from a crypto exchange into a comprehensive ecosystem of blockchain businesses that span digital asset trading, financial derivatives, wallets, research, investment, incubation and other areas. Huobi serves millions of users worldwide, with a business presence covering over 160 countries and regions across five continents. Its three development strategies - "global development, technology drives development, and technology for good" - underpin its commitment to providing comprehensive services and values to global cryptocurrency enthusiasts.
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