Top DeFi Insurer Paid Millions to Euler Hack Victims. Now Nexus Mutual wants the money back

Executives of crypto insurer Nexus Mutual told CoinDesk that its governing body may file a complaint if policyholders who lost money in the recent Euler Finance hack and filed claims for their losses do not repay the insurance project.

Nexus Mutual, one of the largest insurance platforms covering high-risk decentralized finance (DeFi) deposits, is waiting to be reimbursed by five customers who filed claims after the March incident, according to data from the chain. Together, these customers represent about $2 million in crypto out of the nearly $2.4 million in total claims that Nexus Mutual paid.

The situation underscores how parts of DeFi still rely on trust despite crypto advocates’ insistence that cunning code can replace the most fundamental aspect of traditional financial systems.

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

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

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

In a Telegram message, BraveNewDeFi said a policyholder has traded away 200 ETH (over $380,000) owed to Nexus Mutual. CoinDesk attempted to contact 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 have yet to redeem with Euler, BraveNewDeFi said.

Losing one six-figure payout is unlikely to meaningfully affect Nexus Mutual’s finances. The insurer is the strongest coverage provider in DeFi by loss ratio, a metric that captures the health of the insurance business, according to data compiled by Richard Chen, general partner at crypto venture firm 1confirmation.

Nevertheless, Nexus Mutual’s team is keen to avoid losing a penny. They have been in contact with Euler and even got the team to add an alert on the claims portal notifying policyholders of the money owed.

If it doesn’t work, there could be a lawsuit.

“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 of the nine claimants have returned funds, and if Nexus Mutual DAO members feel it is necessary to engage legal counsel to pursue the remaining claims, they should do so.”