DeFi Insurer Nexus Mutual Demands $2M Refund From Euler Hack Claimants. One User Traded it Anyway

Euler's hacker returned most of the money, putting the insurer that already paid claims in a pickle. Members of Nexus Mutual could get lawyers involved if the $2 million they’re owed isn’t returned.

AccessTimeIconApr 12, 2023 at 7:35 p.m. UTC
Updated May 9, 2023 at 4:12 a.m. UTC
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Leaders of the crypto insurer Nexus Mutual told CoinDesk its governing body may lawyer up if policyholders who lost money in the recent Euler Finance hack and filed claims for their losses don’t pay back the insurance project.

Euler suffered a $200 million hack last month, but the culprit returned nearly all the money. So, Nexus Mutual covered losses for people who ended up not actually having losses.

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  • Nexus Mutual, one of the largest insurance platforms covering high-risk decentralized finance (DeFi) deposits, is waiting to get paid back by five clients who filed claims after the March incident, according to on-chain data. Together, those clients represent about $2 million in crypto of the nearly $2.4 million in total claims Nexus Mutual paid.

    The situation underscores how parts of DeFi still rely on trust despite crypto proponents’ insistence that crafty code could supplant that most fundamental aspect of traditional financial systems.

    At press time Euler’s redemptions portal had returned $133 million in value to 457 users, six of whom were also Nexus Mutual policyholders. Of those six, four have returned some $380,000 in various cryptocurrencies to the group. The two that haven’t can be seen on chain swapping their redeemed cash for other cryptos, sending them to other addresses, and just generally being a degen. Their share of the pot amounts to nearly $400,000.

    Problem is, it’s not their money to spend. According to Nexus Mutual’s pseudonymous head of communications, BraveNewDeFi, those holders agreed to return the value of their claims to Nexus Mutual if they got their money back from Euler. That situation has come to pass: Euler’s hacker returned the funds and so Euler on Wednesday began processing redemptions, including to those already paid by Nexus Mutual.

    “This is the first claim event where an exploited protocol was able to recover the lost funds from the attacker,” said BraveNewDefi.

    In a Telegram message, BraveNewDeFi said one policyholder has traded away the 200 ETH (over $380,000) they owe to Nexus Mutual. CoinDesk attempted to reach out to the owner of that address but has not heard back. Most of the other eight have either paid back the Nexus Mutual decentralized autonomous organization (DAO) or haven’t yet redeemed with Euler, BraveNewDeFi said.

    Losing one six-figure payout would likely not impact Nexus Mutual’s financials in a meaningful way. The insurer is the strongest coverage provider in DeFi as measured by loss ratio, a metric that captures the health of its insurance business, according to data compiled by Richard Chen, general partner at the crypto ventures firm 1confirmation.

    Still, Nexus Mutual’s team is keen to avoid losing even a penny. They’ve been in contact with Euler and even got that team to add a notice to the claims portal that alerts policyholders to the money they owe.

    If that doesn’t work, then lawsuits might follow.

    “Nexus Mutual DAO members have deep connections to legal professionals within the industry,” the protocol’s founder, Hugh Karp, told CoinDesk on the project’s Discord server, referring to the so-called decentralized autonomous organization that runs the platform. “Already four out of the nine claimants have returned funds and if Nexus Mutual DAO members feel it's necessary to engage legal counsel to pursue the remaining claims then they should do so.”


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    Danny Nelson

    Danny is CoinDesk's Managing Editor for Data & Tokens. He owns BTC, ETH and SOL.

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