Student rumour network.. love it. Case of Chinese whispers on the failed project i'm afraid, if you don't screw up the odd conceptual design you're not pushing the envelope hard enough.
Admittedly leaving part way though a year isn't ideal, however the staff did know in good time, it would have been up to him what he wanted to say to the undergrad students.
The provisioning of a replacement was a bit of a challenge (as i'm sure you know Dr. Isikveren had a unique lecturing style) but as far as I know everything did get covered and suitable account of any disruption will no doubt be taken.