Nemo Protocol to Issue Debt Token for $2.6M Hack Victim Compensation

Nemo Protocol launches debt token initiative to reimburse users after $2.6 million security breach—because in crypto, even your losses get tokenized.

THE RECKONING

DeFi platform Nemo Protocol confirms it will mint a specialized debt token to compensate victims of last week's $2.6 million exploit. The move represents one of the more innovative—some might say desperate—approaches to hack recovery we've seen this cycle.

THE FINE PRINT

The debt tokens will represent claimable assets against future protocol revenues, essentially making victims involuntary investors in their own reimbursement. It's the financial equivalent of 'we'll pay you back with the money we make from your money.'

SECURITY WAKE-UP CALL

The hack exposes lingering vulnerabilities in DeFi's rapid expansion phase, reminding everyone that in the race for yield, security sometimes gets lapped. Protocol teams across the space are now double-checking their smart contracts—about $2.6 million too late for Nemo users.

THE ROAD AHEAD

If successful, this approach could set precedent for how DeFi protocols handle future exploits. If not, it'll become another cautionary tale in an industry that's collecting them like NFTs. Either way, victims get to watch their compensation fluctuate with the market—because nothing says 'making whole' like adding volatility to your losses.

What is the Nemo Protocol NEOM token initiative?

While direct reimbursement in stablecoins WOULD have been the preferred option, Nemo Protocol admitted in a September 14 statement that it does not currently have the capital to make victims whole immediately.

Instead, NEOM tokens will be issued on a one-to-one basis with the dollar value of each user’s loss, based on the snapshot taken at the moment the protocol was paused. According to the team, this system is designed to ensure fairness and transparency while giving users flexibility in how they recover their funds. 

The program will begin with an asset claim and migration process. Users affected by the hack will first be able to migrate their remaining assets into new, multi-audited smart contracts. At the same time, they will receive $NEOM tokens equivalent to their total loss amount. From there, they can choose between selling the tokens immediately through a Sui-based liquidity pool or holding them as the team works to inject value into the redemption pool over time.

Any funds recovered from the attacker will go into this pool, alongside a portion of external capital raised or loans secured by the team. To keep progress visible, Nemo will provide bi-weekly updates and launch a public dashboard to track redemptions and token burns in real time.

To provide victims with immediate liquidity, Nemo will seed a NEOM/USDC trading pair on a Sui-based decentralized exchange. This means users who do not wish to wait for long-term recovery can sell their tokens on the open market, while those willing to hold can benefit from any future recovery of assets.

How the Nemo protocol hack happened

The September 8 exploit drained $2.6 million from Nemo’s liquidity pools. The post-mortem traced the breach to an unaudited code deployed by a developer, which introduced critical vulnerabilities. A public flash loan function, combined with a flawed pricing mechanism, gave the attacker a way to manipulate pool balances and siphon funds.

The stolen assets, mostly stablecoins, were later bridged to Ethereum. The incident, which marked the second exploit to hit the sui network this year after the May Cetus hack, caused Nemo’s TVL to collapse from over $6 million to around $1.5 million in a matter of hours.

Nemo has since admitted to failures in its audit process and internal controls. The team has pledged stricter oversight for code upgrades, multiple external audits, and stronger bug bounty programs to improve security moving forward.

The launch of the NEOM token is now the central piece of its recovery plan. Whether it restores confidence among affected users will depend on how effectively the protocol can recover stolen assets and sustain demand for the debt token.