One of the best things about the Exiles series was the chance to see familiar characters and concepts pushed to their extreme in no-holds-barred stories free to play fast and loose with Marvel continuity. Those are the exact same qualities that defined the team's most terrifying villain. Capable of seizing control of anyone's mind and shaping the reality around him to his whim, Proteus was the most terrifying, powerful, and deliciously evil nemesis the Exiles ever faced.
The reality-hopping team of mutants known as the Exiles faced many dangerous threats in their day. On a mission to travel to many different iterations of the Marvel universe, the team managed to defeat the unparalleled mind of an evil Professor Xavier and the unimaginable strength of King Hyperion, but it was Proteus who pushed them to their limits. Existing only as an energy construct that parasitically took over the body of his targets, Proteus further had the ability to shape reality around him to his whim.
After plaguing the X-Men in the past, Proteus took center stage against the Exiles as a major nemesis starting in 2005's Exiles #69, by Tony Bedard and Paul Pelletier. He established his threat almost immediately by targeting one of their core members, their leader Mimic who helped found the group and was arguably their most powerful member. Mimic had the power of several mutants wrapped into one, including the ability to exploit Proteus' one weakness. Incapable of affecting metal, Mimic seemingly had the perfect counter to stop Proteus by coating himself in Colossus' steely skin and skewering him with Wolverine's metallic claws. But even that couldn't stop the villain.
Aided by his ability to warp reality and affect the minds of those around him, Proteus forced Mimic to turn his skin back to human form just long enough to seize control of his mind. Now possessing the body of their strongest and most cherished members, not only were the Exiles completely outclassed in power but they were forced to pull their punches for fear of killing one of their dearest friends. What was most terrifying about Proteus was the way he combined all of the worst things about a villain into one, tormenting the heroes emotionally even as he overwhelmed them with sheer power.
Even when Mimic's body perished, Proteus continued on to other bodies, using his powers to undergo a world tour as he plagued many realities with his menace. The Exiles were forced to hunt him from one world to the next perpetually incapable of beating him once and for all. When he possessed their member Morph they were back at square one, held back from fighting at their full potential for fear of killing their friend. Perhaps most fascinating of all was the identity crisis that took place thereafter as Proteus and Morph struggled for control over the same body, refashioning the very concept of identity.
Ultimately it was the Exiles' home base of the Crystal Palace that served as Proteus' final prison, absorbing his energy form into itself after expelling him from Morph's body. For nearly two dozen issues Proteus served as a memorable villain to the Exiles, devastating to them in battle before shifting entirely to a character-driven element that dominated Morph's character arc. It takes a truly profound villain to serve so many different roles and to challenge the heroes on so many levels, but that's exactly what Proteus did.