We had the following setup: gems (group) containing gems-private (hosted) and gems-rubygems (proxy). Then we removed gems-rubygems (proxy) from the list of members of that group due to https://issues.sonatype.org/browse/NEXUS-18799. We are still using that group to install private gems currently hosted on gems-private.
When attempting to update a private gem we would get the following:
Running bundle update private-gem —verbose shows that Nexus is being hit for gems hosted by Rubygems.org and returning 404 and halting the entire process.
We deleted the group and recreated the group without ever adding gems-rubygems back to the list of members and the problem went away.