What we can learn from the fallout of the Surf Shark Society NFT fiasco

From rug pull to refund, the inside story of a much-hyped Pinoy NFT
Mar 10, 2022
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MINUTES before red-faced founders went on Discord and made an announcement that sent shockwaves across their community, Alfonso Valmores and his team noticed something a little fishy going on with the publicly available digital transactions of NFT project Surf Shark Society.

Minting was already happening at a fever pitch. The hype was at a climax. For the past two months, Surf Shark Society — styling itself as the “fastest growing Filipino NFT community” — had amassed a following of more than almost 20,000 on Discord. On TikTok, influencers shilled the promised 3,333 pieces of digital art: grinning, razor-toothed cartoon sharks whose ownership promised a yacht-load of benefits, which, according to a Facebook post from February, included parties, merch, webinars, discounts with partner brands, and — for those “Whale Sharks” who owned six or more — a gold membership card.

Some of the NFTs of Surf Shark Society.

But at zero hour, Valmores noticed that no money was coming into the project’s treasury wallet.

Using his Discord handle of Cosmo, Valmores posted on the project's Discord chat, tagging a founder and warning him of the situation.

“This said wallet address, after nagmi-mint ang mga tao, supposedly dapat may pumapasok doon,” said Valmores to Spin.ph. “Or kung may nilabas ka man dun, makikita na may pumasok in the first place.

“Ang nakita kasi namin, walang pumapasok.”

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    How Surf Shark Society got everyone's attention

    Unlike other popular NFTs like, say, the digital pets of Axie Infinity, Surf Shark Society’s smiley sharks weren’t built on the Ethereum blockchain, but the competing Solana blockchain. This was the reason why the project caught the eye of Valmores in the first place. A 23-year-old former esports athlete, he founded Cosmic University, a venture that has gone into Axie Infinity, Wild Rift esports, and, most recently, blockchain development. With an upcoming project that was also anchored on Solana, he was curious to see how SSS would turn out.

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    “Nagulat rin kami, kasi 17 years old lang pala siya,” Valmores said, referring to the SSS co-founder Kenri Ang. “Yung inisip ko, if this kid pulls this off, he will forever be GOATed sa community ng Pilipinas na as one of the first movers sa NFT.”

    Thinking of his own upcoming project, he said, “We prayed to the heavens na hindi rug pull ang SSS. Kasi it would set us back e. Mahirap na kunin uli ang tiwala ng community once na mangyari yun.”

    Spin.ph has reached out to Surf Shark Society and its various representatives on Discord and social media for comment. While we were unable to get in touch, co-founder Kenri Ang posted this update on the project's Discord channel on March 4, as founders committed to refunds:

    "We would like to ask for your understanding regarding our situation. We are also shocked and devastated as to what happened. We do not have any intention to hurt anyone but we commit to refund all the holders in due time. We already sought help from law enforcement authorities. Please give us time to make amends. We apologize to everyone who got involved with our circumstances. We are not affiliated with any of the partners and influencers in the past."

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    A gold membership card, one of the promised perks of the project.

    Surf Shark Society announces developer rug pull

    In the crypto community, a “rug pull” is exactly that: the sudden pullout of a project, leaving investors out of pocket and dazed on the floor. Social media channels go dark, previously active chat groups go silent, everyone and anyone who’s handled your money is mysteriously out of reach.

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    At 10:07 p.m. on March 3, Ang went on Discord to announce that their developer had “rugged them,” according to a report on BitPinas.com.

    This developer — a certain “Randy Santiago,” as revealed by another co-founder on the Surf Shark Society Discord — had “abandoned our project and withdrew the public mint treasury,” as the group announced on Twitter.

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    What's a developer's job in an NFT project? Well, the dev builds the so-called Candy Machine — the kiosk, if you will, that stores the NFTs, and sends the money to the treasury wallet linked to the project. And they also design an NFT’s utility within the digital ecosystem; a use case beyond the hype of owning an in-demand collectible.

    After Ang's announcement, confusion and panic reigned over Discord and spilled onto the rest of social media. How could Surf Shark Society — set up by founders whose faces had appeared on a major broadsheet, backed by more than a dozen organizations — be yanked away in a rug pull?

    With anger mounting within the community, Ang hopped on Discord shortly after his initial announcement to say, “We have onboarded new developers who will help us de-rug! We are the victims too and we are doing everything we can. I assure you we will continue to fund the project. A new collection will be created and will be airdropped to people who minted during the old collection.”

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    These new developers were, apparently, Cosmic University.

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      More promised membership perks from Surf Shark Society.

      Valmores offers to de-rug the project

      Four minutes before announcement, at 10:03 p.m., Valmores had realized that Surf Shark Society was careening straight towards the deep end, and reached out to Ang via private message on Discord. In screenshots viewed by Spin.ph, Valmores talked to the distraught founder, and offered to “de-rug” the project.

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      It was in the chats that Valmores found out that Ang and the rest of the Surf Shark Society team had never even met “Randy Santiago.”

      “Sabi ko, 'May I know if kilala mo yung dev mo personally?'” recalled Valmores. “E sabi ko, doxxed [nga] kayong lahat, pero yung may hawak ng millions niyo, baka hindi niyo kilala.”

      In the chat, Ang replied: “From a guild.”

      Eager to prove that he was no “Randy Santiago”, and to walk the talk of trust and accountability crucial to crypto success, Valmores offered to meet up, in person, that same night. There was a 24-hour fast food joint in Quezon City; they agreed to meet there. Talking on the phone, Valmores recalled that Ang was crying. “As in hagulgol.”

      Past midnight, Valmores drove to the location. Despite the late hour, he was feeling energized. Surf Shark Society may have been thrown to the sharks, but here was a chance to turn things around — and he’d be in the driver’s seat.

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      “The reason na gusto namin i-derug is the community,” he explained to Spin.ph. “20,000 members sa Discord, tapos puro Pinoy? Andami nun.”

      Valmores waited at the restaurant for two hours. Kenri Ang was a no show.

      Effects ripple through Pinoy NFT community

      Meanwhile, a roiling storm of emotions was being unleashed on social media. The night of Ang’s announcement, many members of the community jumped to Twitter Spaces to process their anger, disbelief, and confusion. According to the BitPinas report, it was clear that it was many investors’ first NFT project. Emotions, understandably, were running high as money was lost — more than P11 million, according to BitPinas’ Michael Mislos.

      The following morning, almost 8,000 users tuned into another hours-long discussion on Twitter Spaces. Beyond the spilled tea, members of the NFT community were also worried about the ramifications of the Surf Shark Society collapse.

      “If people are seeing this as something na kagagawan lang ng Surf Shark Society and wala naman masyadong magiging impact, I think people who are thinking that are wrong,” said Axie Infinity content creator Extra Rai during the Twitter Space discussion. “Dahil sa nangyari na ‘to, this is going to have a huge impact talaga sa Filipino NFT space.”

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      He went on: “Can you imagine ngayon na people are saying, red flag na ang Pinoy projects? Can you imagine being a project head na looking forward to making your own project tas biglang magkakaroon ng ganitong klaseng issue?

      “This is actually a huge blow sa space natin.”

      Valmores, who is one of those project managers, agrees with the sentiment. The morning after their supposed meet-up in Quezon City, the two had chatted on Facebook, with Kenri asking to renegotiate Cosmic University’s development fee. When the two couldn’t come to terms, Valmores wished Ang good luck, telling him, “I hope you get to settle all of this, para makuha mo uli yung tiwala ng tao.”

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      It was the community’s trust, after all, that the sharply glinting teeth of Surf Shark Society had chewed through — and then spat on the ground.

      Valmores also points out that, because of this entire debacle, people might even shy away from projects run by young, hungry, Gen Z crypto entrepreneurs.

      “It just puts a bad image sa age bracket namin. Parang mawawalan tuloy ng tiwala yung ibang tao kasi bata kami,” he rued. “Doon ako siguro pinaka nati-trigger personally. Kasi alam kong maraming capable na kasing age ko na who made it big sa crypto space. Hindi talaga hadlang ang age. Mere number lang dapat siya.”

      A schedule of Surf Shark Society events, before the rug pull.

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      Surf Shark Society begins refunds

      Almost a week into the developer rug pull, the founders seem to be living up to their promise of refunding their investors.

      On another Twitter Spaces, this time, with the SSS team onboard, the founders repeated their vow to tap into their own personal money and give refunds to everyone who minted a Surf Shark Society NFT. The following day, March 5, these refunds began pouring into the crypto wallets of their backers.

      On social media, Surf Shark Society even posted screencaps from people who confirmed the refunds.

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      As for what happened on the night of March 3, Kenri Ang posted this explanation on Discord: "We belatedly discovered that on the day of the mint, our blockchain developer rerouted the treasury wallet to his own wallet. He also shut down the website. We then proceeded to ask him continuously what was happening and when he replied after ignoring us for hours, he put the blame on some other developer."

      The de-rugging of Surf Shark Society never took place. Instead, the founders chose to give back everyone’s money. But the once-hyped snaggletoothed, smiling sharks will likely not be forgotten anytime soon — if only as a cautionary tale for NFT investors.

      Valmores has been burned by enough NFT projects that he considers his investment losses as “tuition fee” to learn more about the space. But he does sympathize with those who lost money in the project.

      Unfortunately, in his pessimistic view, it’s almost impossible to guarantee your hard-earned money would be safe from real-life sharks. Still, he’s learned to spot a few red flags in the water. And beyond the vague “do your own research” platitudes that are floated in every crypto conversation, he offers these pieces of concrete advice.

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      How to be extra careful of rug pulls

      First, take a look at the community. And he’s not just talking about the influencers shilling the project. A big enough community, said Valmores, is attractive enough that even a rug pull project could be brought back from the brink by a developer eager to tap into a strong following.

      This was his plan with Surf Shark Society. After all, he’d seen it happen with another project called Balloonsville.

      Secondly, he advises investors to look into the utility of an NFT. Real-world utility — discounts in partner establishments, yacht parties, gold membership cards — is good. But Web3 utility — an NFT that’s useful within the blockchain — is even better. A knowledge of how NFTs are minted and developed is also useful to sniff out any suspicious activity, which is how Valmores sounded the red alert on Surf Shark Society's developer in the first place.

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      And finally — well, stop us if you’ve heard this one before.

      But it bears repeating, time and time again, whether you’re putting your hard-earned money into stocks or sharks: “Never invest what you can’t stand to lose.”

      May this be a lesson we all take to heart.

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