Nemo Protocol launches debt token program for $2.6 million exploit victims

Nemo Protocol, the recently exploited Sui-based yield-trading platform, has introduced a compensation plan involving debt tokens for affected users. 

According to a blog post published Sunday, Nemo's initiative centers on issuing NEOM tokens equivalent to users' losses calculated in USD terms.

"While we would have preferred to reimburse everyone directly in USD, we do not have sufficient funds or capital raised to do so, which is why we adopted the debt token strategy as the most viable path forward," Nemo said in the post.

The Sept. 7 exploit, first reported by onchain security firm PeckShield, drained $2.6 million from the platform's market pool as the attacker exploited vulnerabilities that were introduced into the code by a developer and deployed without proper audits.

Nemo stated that it aims to ultimately make all users whole from the principal losses, calculated based on an onchain snapshot taken when the protocol was paused after the incident.

The protocol has set forth a three-step recovery step. First, it plans to allow users to access a dedicated portal to migrate residual values from compromised pools to new, audited, multi-party managed contracts. During the migration, users are set to receive NEOM tokens equivalent to their calculated losses. 

Holders would then have two options: exit via an automated market maker pool or keep their tokens and wait for fund recovery. Nemo plans to launch an initial liquidity pool on a major Sui decentralized exchange, pairing NEOM with USDC to enable immediate exits.

Nemo's compensation model includes a plan to fully deposit any recovered funds from the exploit into a multi-party redemption pool for proportional claims by NEOM holders. The platform said it plans to also allocate a portion of external liquidity loans or strategic investments into the redemption pool for liquidity support.

"To ensure full transparency, we will establish a dedicated website to track the NEOM burn progress, allowing the community to monitor real-time updates on the initiative," Nemo said.

In last Friday's post-mortem on the incident, Nemo stated that the stolen funds were moved from Sui to Ethereum via Wormhole CCTP. The company said at the time that it is working with security teams on Sui to trace the funds while establishing a white-hat agreement framework and a hacker bounty.