The world of cryptocurrencies is no stranger to wildly innovative scams and unscrupulous implementations of technology. But the recent “exit scam” involving promising startup Oyster (PRL) is in a league of its own. Not only does it have all the usual drama and ignominy that accompany a standard exit scam, but it also throws in a whole load of doubt and a bizarre and brazen rebuttal from its perpetrator.
Cryptocurrencies are built upon a fundamental technology called the blockchain, and it is here that both the true potential and the ultimate fate, of cryptocurrencies reside. One of the key features of the blockchain is its immutability, once a block has been generated and signed, it is then a permanent part of that chain.
This property has allowed for the emergence of so-called smart contracts, agreements between parties which cannot late be reneged on, once the conditions for the contract are met, it executes and pays out in some way. Many of the more ambitious and utopian visions for the future of cryptocurrencies are reliant upon the use of these smart contracts.
Oyster was a platform designed to allow website owners to earn money by assisting in the securing and storage of files using the IOTA Tangle. The associated token, (PRL), is used to pay network providers for their services, as well as serving as a medium of exchange between users of the platform.
Oyster was one of the more promising startups out there. The Oyster Protocol, as the service is known, is a hybrid IOTA/Ethereum smart contracts platform. The purpose of the platform was to provide website owners with a means of earning revenue other than showing adverts to their users. Instead, they could contribute computing resources towards services on the Oyster platform in exchange for PRL tokens. PRL, which is an ERC020 token, has been listed in the KuCoin exchange since December.
A Smooth Criminal
As with all respectable cryptocurrency / blockchain projects, the underlying codebase that Oyster is built on was vetted on numerous occasions. It seems that Oyster’s founder and chief architect, the presumably pseudonymous Bruno Block, had insisted on keeping a particular function, one which allowed him to appoint himself as director and issue new tokens, active in the live code.
According to Oyster CEO William Cordes, Bruno told the other members of the team that the function needed to remain open so that he could adjust the value of the peg over time. Instead, Cordes claims, Bruno left the feature in to act as a trapdoor. By exploiting the mechanism, Block was able to appoint himself as director of the Oyster network, and from this position issue a number of new tokens, which he then converted into Ethereum through KuCoin, and finally sold for cash.
In all, Bruno minted 3 million new PRL tokens. According to an internal review by Oyster, he was able to cash out at least $300,000.
Cordes went on to state his belief that Block had carried out the exit scam to avoid the impending implementation of Know Your Customer (KYC) procedures on KuCoin, which came into force on November 1.
While the remaining members of the Oyster team have promised that they will make those who were duped into buying falsely issued tokens whole again, and appear to be just as taken aback by the whole thing as everyone else questions have been raised about exactly what they knew, and when they knew it.
For one thing, if events have transpired as described by Cordes and co, they should have had at least minimal knowledge of Bruno’s true identity. Since allegedly making off with almost half a million dollars worth of fraudulently generated crypto, Bruno has engaged in a Telegram conversation with Cordes, details, and screenshots of which have been posted online.
In that conversation, Block goes on a bizarre rant about the “massive debt bubble prison” of modern society and how he took the actions he did in order to escape from the rat race. In fact, the conversation highlights Bruno’s lack of remorse as he doesn’t see anything wrong with what he did, going as far as to say that he “dumped on” Cordes and his “VC friends” before they could “dump on everyone else”.
It seems unlikely that we have heard the last of Bruno Block. According to Cordes, him and the rest of the team, who were “fired” by Block, have filed law enforcement reports and will seek to vindicate themselves. As to the future of the Oyster protocol itself, it seems that that will ultimately come down to investor confidence.