Sui-based DeFi yield-trading platform Nemo Protocol has unveiled a compensation plan designed to address losses from its recent $2.6 million exploit, opting to issue debt tokens as part of the recovery strategy.
In a blog post on Sunday, Nemo confirmed that it would introduce NEOM tokens, pegged to users’ USD-denominated losses, as a mechanism to gradually repay those impacted. The team explained that while direct reimbursement in USD would have been preferable, insufficient capital reserves made this approach unfeasible. Instead, debt tokens were identified as the most viable way forward.
The incident, which took place on Sept. 7, was first flagged by blockchain security firm PeckShield. According to the investigation, the exploit stemmed from vulnerabilities introduced by a developer and deployed without proper audits. This oversight allowed attackers to siphon off $2.6 million from Nemo’s market pool, forcing the protocol to halt operations and freeze affected assets.
Debt Token Compensation Strategy
Under the plan, Nemo will issue NEOM tokens based on an onchain snapshot taken at the moment the protocol was paused, ensuring users’ principal losses are fully recorded. The recovery process will follow a three-step model:
- Migration of Residual Assets – Users will be able to move remaining funds from compromised pools into new, audited, multi-party managed contracts via a dedicated portal. During this process, they will receive NEOM tokens reflecting their calculated losses.
- Liquidity Options – Holders of NEOM tokens will have two choices: either exit immediately via an automated market maker (AMM) pool or retain tokens in hopes of full repayment. Nemo intends to launch an initial liquidity pool on a major Sui-based decentralized exchange, pairing NEOM with USDC, enabling affected users to liquidate if they wish.
- Redemption Pool – All recovered funds from the exploit will be placed into a multi-party redemption pool, where NEOM holders can make proportional claims. Nemo further committed to allocating a portion of external liquidity loans and strategic investments into this pool, ensuring sustained repayment capacity.
Transparency and Recovery Efforts
To build confidence, Nemo pledged to launch a dedicated website that will allow the community to monitor real-time NEOM token burns and redemption progress. This effort, the team said, will reinforce transparency and accountability as users track the recovery process.
The stolen funds, according to Nemo’s post-mortem, were bridged from Sui to Ethereum via Wormhole CCTP. The protocol confirmed it is collaborating with security teams across both networks to trace the funds. In parallel, Nemo is setting up a white-hat agreement framework and offering a hacker bounty program in hopes of recovering assets.
While the exploit dealt a heavy blow to user trust, Nemo’s debt token model aims to balance immediate relief with long-term recovery, ensuring that victims are eventually made whole while keeping the protocol’s ecosystem alive.
