This is defiantly the rare drop from turning in Cracked Finger Bones. We did the quest 15 times (3 stacks of cracked finger bones) and got 14 Greatsword of Lost Souls and 1 Waterlogged Leather Tunic.
Either Simati the Cursed (common) or Fissan Gill (rare) can spawn during one of the waves, however they both seem to have the exact same loot table. When we found the Waterlogged Leather Tunic it was on Fissan Gill.