Actions by the pNetwork DeFi protocol team in the recent Gala Games token incident were not a ‘white-hat operation’ but a malicious hack aimed at profit. This is stated in Huobi’s statement.
On November 3, unknown individuals released approximately 55.6 billion synthetic pGALA tokens worth up to $2.2 billion on the BNB Chain. Some of the assets were sold through the PancakeSwap DEX, earning over $4.5 million. Huobi believes that a subsequent coordinated attack from multiple addresses yielded another more than $10 million in profits through arbitrage.
At that time, the pNetwork explained that they had found a vulnerability in the pGALA smart contract. The platform’s statement was confirmed by Gala Games blockchain president Jason Brik.
“We believe this was a deliberate attack planned by the pNetwork team, and the ‘white-hacking’ operation is simply an illegal justification that pNetwork is seeking to avoid legal consequences,” Huobi asserts.
The exchange says it has solid grounds for such a conclusion. The arguments cited include:
- The vulnerability appeared in the smart contract 67 days before the incident, and there was no indication that it could be exploited by anyone from outside;
- The developers warned Huobi of their actions via unofficial channels 50 minutes before the ‘hack’, leaving no time for a proper response;
- According to pNetwork’s statement, the 55.6 billion pGALA emission was intended to compensate the PancakeSwap liquidity pool, but the pool’s volume amounted to only about $400,000.
Huobi noted that the Gala Games and pNetwork teams ‘could have used a safer method to fix the vulnerability’:
“However, they chose to hide the facts and carried out a massive attack using 55.6 billion tokens within 50 minutes after contacting exchanges. This is a malicious attack, driven by profit, and it is tantamount to an act of terrorism against innocent users and the platform. The entire industry has suffered a massive blow as a result of this incident.”
The exchange contacted the pNetwork team to discuss ‘reasonable compensation’ for the victims. As of the time of Huobi’s statement, it had not received an ‘acceptable response’.
“Given pNetwork’s unverified one-sided statement about the Gala incident, which diverges significantly from the facts, this shows how the project team is trying to evade responsibility, causing substantial harm to Huobi Global’s users. To fulfil our obligations to clients, we will take the initiative to organise and represent the victims’ interests. We will work with partners to use all lawful means, including class actions and filing police reports, to investigate and press criminal charges against the wrongdoers from pNetwork,” said the exchange team.
Huobi urged those who exploited the vulnerability to return the ‘illegally obtained profits’. The company is prepared to pay attackers from the bounty fund $1 million and not to file suits.
“We strongly condemn Huobi’s false accusations against pNetwork and will pursue legal action. We have documentary evidence that pNetwork acted in good faith and that all actions were agreed in advance with Gala Games,” the DeFi protocol team responded.
1/2 We strongly condemn as untruthful Huobi’s accusations against pNetwork and we will seek legal action accordingly.
We have documented proof showing that pNetwork has acted in good faith, that all actions were agreed upon in advance with GalaGames and that…— pNetwork 🦜 (@pNetworkDeFi) November 6, 2022
According to pNetwork representatives, the exchange confirmed receipt of the warning within two minutes, but deposits were blocked only several hours later. They also refuted the claim that the protocol earned any profits from this operation.
Web3 industry losses from exploits year to date have approached $3 billion, with October recording a loss of $760.2 million.
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