Oyster Protocol Founder Bruno Block Pulls Exit Scam
The directorship of Oyster Protocol’s PRL smart contract was shifted on October 29th. That allowed millions of new tokens to be minted before a massive selloff on KuCoin occurred. Now, Oyster Protocol CEO William Cordes has declared PRL founder Bruno Block, who recently took a large step back from the project, was the only person capable of such a move.
Update 10/30/2018: In a long and at times downright bizarre series of Telegram posts [abridged here for readability], a seemingly unhinged Block has gone on the offensive, claiming he dumped PRL to get in front of “insider trading” among the Oyster Protocol team, including CEO “Bill” Cordes, ahead of an alleged Binance listing.
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Something Rotten in the State of Oyster
On October 29th, the Oyster Protocol community was rocked after the directorship of the PRL token’s smart contract was transferred, a malicious shift that preceded the minting of 3 million new tokens through a reopened token sale.
Accordingly, the PRL price cratered, its market cap deflating by millions in minutes before trading of the token was suspended on several exchanges, principally KuCoin.
Trading of Oyster PRL on @kucoincom has been suspended for the time being.
— Oyster Protocol (@OysterProtocol) October 29, 2018
In the aftermath of the attack, the project’s founder, whose true identity remains unknown but who operated under the pseudonym of Bruno Block, has been fingered as the culprit.
So said Oyster Protocol chief executive officer William Cordes, who, in a post-mortem Medium debrief, maintained he and his subordinates were as blindsided by the deployment of the transferDirector function as investors were.
Cordes alleged that Block was likely coming up against KuCoin’s impending intensified Know Your Customer process and had probably decided to exit while he could still enjoy some measure of fleetness:
“Bruno was the only one who had the ability to transfer directorship within the PRL smart contract. After our initial review, we are inclined to believe that these were solely the actions of Bruno Block and that he did this now to avoid detection from KuCoin KYC procedures (that will be implemented on November 1st). These KYC procedures would have limited withdrawals on Non-KYC’ed accounts to no more than 2 BTC per day and would have prevented this from happening.”
How’d This Happen?
While Oyster PRL’s smart contract reportedly passed three separate security audits hitherto, Block had kept the less-technically inclined members of Oyster Protocol’s team in the dark by saying “the directorship of the token contract had to remain open so that the peg could be adjusted over time,” Cordes noted.
In retrospect, the Oyster Protocol CEO called that dynamic nothing more than a “trapdoor mechanism.”
It must also be noted that Block had created and maintained the PRL smart contract exclusively before the team later widened up to new members.
In a June 2018 profile of the vision and potential weaknesses of the play, Bitsonline noted Cordes’ joining of the project coincided with a campaign to make Oyster Protocol more “public-facing,” i.e. an address of the concerns that Block’s anonymity was ultimately hindering PRL’s advancement.
“To spearhead this new era, I have been appointed as the new CEO of Oyster,” Cordes wrote at the time. “This will simultaneously free up Bruno’s time to focus exclusively on protocol architecture and allow me to leverage my business and managerial experience to take Oyster to new heights.”
For now, it remains unclear if Block planned PRL as a con from the very beginning. The project, which bills itself as a web revenue and data storage system, saw its mainnet go live this past summer.
It’s also unclear if the project’s sister meshnet play, Oyster Shell (SHL), remains exposed to Block in any way. So far, it seems SHL has gone through the episode without being directly compromised in the way PRL was.
What Comes Next
Before it was clear of the extent of the compromise, Oyster Protocol users were already positing that a rollback of some sort would take place.
Per Cordes’s announcement, something of that sort is now “likely” to remedy the damage Block unleashed. On that point, the CEO wrote:
“We are still evaluating our options, but will most likely be executing a contract swap on the block just prior to this all happening (e.g. All 98.5 million PRL prior to the contract vulnerability will be exchanged on a 1:1 ratio to PEARL (or something to that effect)). We will also be evaluating how we can help those that were taken advantage of from this incident. More details to come here but we will do our best to make everyone whole. Despite the losses, $300k only represents ~1.5% of our market cap prior to this all transpiring. While this is far from ideal, this will most definitely not be a deathknell for the project.”
Cordes has also asked that anyone who might have information on Block’s identity to reach out to the project. He highlighted the bitcoin address and ether address that Block had apparently withdrawn his blackhat spoils to so that the funds could be publicly tracked.
“I had no reason to believe Bruno would do something like this to harm the project and much of the work that he had a significant role in creating,” Cordes concluded. “We will not let his selfish actions today damage the long-term viability of the project.”
The whole episode is another unfortunate reminder that what’s interesting and superficially sincere doesn’t equate to wholesomeness in the cryptoverse.
Block Responds: ‘Billions of People Will Die’
On October 30th, Block, or someone using Block’s Telegram account, leveled accusations of CEO Cordes and other Oyster Protocol team members being guilty of “insider trading” and admitted to the massive PRL sell-off accordingly.
“Bill told the group that we got accepted on Binance,” Block alleged at one point. “That’s when the problems started […] So instead of him and his VC friends dumping on you, I dumped on him.”
Block then unleashed a scathing series of skeptical remarks against cryptocurrencies in general, telling the community to flee crypto altogether while saying in the same rant he would fire Cordes and continue programming “the protocol.”
It got stranger from there. Block suggested such continued programming would likely prove useless, however, and turned conspiratorial.
“I don’t believe there will be electricity running through the power grid soon,” he wrote.
The Oyster Protocol founder then delivered a tangent about how “peak oil and the fractional reserve banking system” were going to destroy the world. “Peak oil” refers to the contested theory that widespread economic collapse would coincide with the depletion of the world’s oil supply.
“Billions of people will die, there are massive droughts and food shortages as we speak,” Block said. “I’ve made a lot of dollars by selling PRL, I immediatelly ditched the dollars to buy real things so that I can protect myself and my family from the collapse. That’s all I ever wanted, and now that I have that secured, I will deliver the protocol which I promised myself.”
As such, the Oyster Protocol exit scam episode has deepened, and it’s not clear what’s fact and what’s fiction presently. For their part, the remaining Oyster team has said a fork is coming. But, speaking of fiction, it’s clear in the least that Block is an unreliable narrator. Just how unreliable he is and who can be trusted are the grand questions for now.
“You can also buy popcorn futures on /r/buttcoin,” Block mockingly concluded, referring to the cryptocurrency-skeptic subreddit.
Bitsonline will continue to track this story as it develops.
What’s your take? Do you think anonymous founders are inherent red flags, or is it less black and white than that? Let us know what you think in the comments section below.
Images via Pixabay, Telegram