Huobi Exchange Users Furious After GALA Holdings Are Converted to ‘Meme Token’
Crypto exchange Huobi delisted the GALA/USDT trading pair on Friday after a wrapped version of the token, pGALA, was temporarily rendered worthless after its issuers found a problem with its bridge code.
Huobi users who bought GALA tokens after the incident saw their coins converted to “pGALA,” named for the soon-to-be-retired version of the GALA token trading on Binance Smart Chain.
In an official statement on its website, Huobi referred to its new version pGALA as a “meme token,” noting that it “is not related to the original GALA token.”
Buyers of the mispriced GALA token on Huobi – including several market-making firms – are “pissed” that their GALA tokens have been converted to Huobi’s version of the pGALA token, according to a person familiar with the matter.
“Huobi will delist the GALA/USDT pair at 12:30 (UTC) today and rename GALA as pGALA,” the company said in a statement. Trading of the new pGALA/USDT pair on Huobi was halted as of press time.
In a follow-on announcement, Huobi said it would “convert users' pGALA (former GALA) assets that meet the redeeming conditions to GALA (new GALA) assets at 1:1.” It is unclear, however, how holders of any converted GALA tokens would be able to trade their holdings on Huobi without a GALA trading pair.
Huobi and Gala Games, the company behind the GALA token, didn't immediately respond to a request for comment.
Huobi’s announcement came after a puzzling trading snafu on Thursday. After an incident on Thursday caused the GALA token to fall by around 20% on most crypto trading platforms, the price of GALA on Huobi fell much further to nearly zero. Some users bought the heavily discounted tokens in order to take advantage of the apparent arbitrage opportunity.
so why is GALA literally 0 on huobi again ? lmeow pic.twitter.com/aUng550HzC— CL (@CL207) November 4, 2022
The reason for the initial price drop stemmed from a confusing maneuver carried out by pNetwork – a firm that locks up GALA on the Ethereum blockchain and re-mints it as “pGALA” on Binance Smart Chain. When pNetwork found a vulnerability in its bridging code, it executed a “white-hat” attack on its own token – minting out billions of new pGALA tokens and using them to drain the decentralized exchanges that allow users to swap between pGALA and other BSC-based tokens. The move effectively allowed pNetwork to assume control of users' funds.
pNetwork’s stated plan is to mint out a new, fixed version of the pGALA token sometime soon. It said it would redistribute those new tokens – along with the funds that it drained from pGALA trading pools – back to users at exactly the same quantities they held before the self-exploit.
In the interim, it encouraged users and exchange platforms to halt trading the buggy, soon-to-be-deprecated pGALA token.
Though some traders and exchange firms took pNetwork’s cue, Huobi apparently continued to accept deposits of the pGALA token.
While it’s unclear exactly how Huobi handled deposits of the pGALA token, one trading firm that spoke with CoinDesk hypothesized that the exchange was accepting BSC-based pGALA as normal GALA – meaning people were able to dump the worthless BSC-based pGALA token onto Huobi and sell it on the main GALA order book.
That would explain why the price of GALA on Huobi dropped so sharply in comparison with other trading platforms – some users may have unknowingly been buying and selling the compromised pGALA token instead of the real thing.
As of press time, GALA tokens were trading at around 4 cents, according to CoinMarketCap.