Those were rumors, from few months back, and frankly they were mostly true.
High profile developers, left Crytek (like Tiago Sousa, who was responsible for graphical advancements in engine), and UK studio has been completely dump down.
Unfortunety Crytek is victim of poor managment, bad decisions, and over extending resources, over many area, which they didn’t had any idea what to do.
Crytek was synonym for high end real time rendering tech. That was what they were good at, and they should stick to it.
On personal note since, Martin Mittring (yay!), went to work for Epic, we really haven’t seen any spectacular advancements in CryEngine, after CryEngine 2. CryEngine 2 was just piece of art, and still hold strong.
If anything it kind of went backwards. From the mantra of all time real time to, to somewhat realtime (static light capture probes for example).
Yes, Crysis 3 look awesome, and latest CryEngine definitely can render higher quality/faster compared to CE2. It’s just not this… “omg I cant believe what I see!” thing.