57849 sc high funds gets stuck even when killswitch is enabled

Submitted on Oct 29th 2025 at 08:03:41 UTC by @shadowHunter for Audit Comp | Alchemix V3

Report ID: #57849
Report Type: Smart Contract
Report severity: High
Target: https://github.com/alchemix-finance/v3-poc/blob/immunefi\\_audit/src/MYTStrategy.sol
Impacts:
- Temporary freezing of funds for at least 1 hour

Description

Brief/Intro

Even if killSwitch is enabled by Owner, funds gets transferred from Vault to Adaptor in case of allocation. These funds remain stuck with no way to deallocate until killSwitch is turned off

Vulnerability Details

If killSwitch is true on MYTStrategy and allocation is done then MYTStrategy correctly make 0 changes

if (killSwitch) {
            return (ids(), int256(0));
        }

But still Morpho vault which ignores if any changes were made to id, will send funds from vault to the MYTStrategy adaptor. This should be unexpected

https://github.com/morpho-org/vault-v2/blob/406546763343b9ffa84c2f63742ae55a490b7c42/src/VaultV2.sol#L576
function allocateInternal(address adapter, bytes memory data, uint256 assets) internal {
        require(isAdapter[adapter], ErrorsLib.NotAdapter());

        accrueInterest();

        SafeERC20Lib.safeTransfer(asset, adapter, assets);
        (bytes32[] memory ids, int256 change) = IAdapter(adapter).allocate(data, assets, msg.sig, msg.sender);

Also now you cannot deallocate this stuck funds until owner turns kill switch off which may not even happen (since adaptor does not approve funds to vault due to early exit)

 function deallocate(bytes memory data, uint256 assets, bytes4 selector, address sender)
        external
        onlyVault
        returns (bytes32[] memory strategyIds, int256 change)
    {
        if (killSwitch) {
            return (ids(), int256(0));
        }

Impact Details

Funds get stuck in adaptor

Recommendation

Allocator should not call vault if kill switch is enabled

Proof of Concept

Place this in MYTStrategy.t.sol test suit

function test_killSwitchPreventsAllocation() public {
        //  Enable kill switch
         vm.prank(admin);
         strategy.setKillSwitch(true);

        //  Vault should fail to allocate
         vm.prank(address(vault));
         vm.expectRevert(bytes("emergency"));
         strategy.allocate(abi.encode(0), 100e18, bytes4(0x00000000), address(allocator));
     }

Ouput:

Encountered 1 failing test in src/test/MYTStrategy.t.sol:MYTStrategyTest
[FAIL: next call did not revert as expected] test_killSwitchPreventsAllocation() (gas: 50021)