57970 sc high forcerepay leaves cumulativeearmarked stale

Submitted on Oct 29th 2025 at 17:32:25 UTC by @winnerz for Audit Comp | Alchemix V3

• Report ID: #57970

• Report Type: Smart Contract

• Report severity: High

• Target: https://github.com/alchemix-finance/v3-poc/blob/immunefi_audit/src/AlchemistV3.sol

• Impacts:

  • Contract fails to deliver promised returns, but doesn't lose value

Description

Brief/Intro

When liquidation triggers _forceRepay, the protocol reduces the user’s account.earmarked but doesn't decrease the global cumulativeEarmarked. This violates the invariant that the global earmark equals the sum of all account earmarks. Hence, subsequent calculations that depend on cumulativeEarmarked (e.g., liveUnearmarked = totalDebt - cumulativeEarmarked and weight updates) operate on an inflated value.

Vulnerability Details

• Invariant: Let E = sum over all accounts of account.earmarked. The contract maintains a global cumulativeEarmarkedintended to equal E. For any flow that decreases an account’s earmark by x, cumulativeEarmarked must also decrease by x to preserve E = cumulativeEarmarked.

• _forceRepay decreases the user’s earmark but does not decrease the global tally:

  • src/AlchemistV3.sol:762 account.earmarked -= earmarkToRemove;

  • No corresponding cumulativeEarmarked -= ... in _forceRepay.

• In contrast, the other flows preserve the invariant:

  • repay() decreases both the user earmark and the global tally: src/AlchemistV3.sol:523 (account) and src/AlchemistV3.sol:526 (global).

        account.earmarked -= earmarkToRemove;
  
  
        uint256 earmarkPaidGlobal = cumulativeEarmarked > earmarkToRemove ? earmarkToRemove : cumulativeEarmarked;
        cumulativeEarmarked -= earmarkPaidGlobal;

  • redeem() decreases the global earmark by the redeemed amount: src/AlchemistV3.sol:613.

• After _forceRepay removes x from a user, E becomes (E − x) while cumulativeEarmarked remains E. The global variable is now overstated by x until a later redemption happens to reduce it. This is observable system-wide and persists across blocks.

Downstream effects (where the overstated global is used)

• _earmark() computes new earmarks and weights using global values; see src/AlchemistV3.sol:1119–1128, especially:

  • cumulativeEarmarked += amount; (src/AlchemistV3.sol:1128)

  • WeightIncrement(amount, liveUnearmarked) where liveUnearmarked = totalDebt − cumulativeEarmarked

• Because cumulativeEarmarked is overstated after _forceRepay, liveUnearmarked is understated, and weight updates can be mis‑scaled. This alters the timing/proportions of subsequent earmarks/redemptions across users.

Impact Details

Contract fails to deliver promised returns, but doesn't lose value

• The PoC demonstrates a deterministic, system‑wide accounting inconsistency (global earmark > sum of per‑account earmarks) in core logic that persists until later redemptions modify the global tally.

• The overstated cumulativeEarmarked reduces liveUnearmarked = totalDebt − cumulativeEarmarked and mis‑scales the denominators used by weight updates in _earmark(), altering the timing/proportions of subsequent earmarks/redemptions. This does not claim theft/insolvency/freezing in this report; the issue is a correctness failure in how “promised” earmark/redemption accounting is computed over time.

References

• _forceRepay per‑account decrement only: src/AlchemistV3.sol:762

• repay() per‑account and global decrement: src/AlchemistV3.sol:523-526

• redeem() global decrement: src/AlchemistV3.sol:613

Mitigation

In _forceRepay, after reducing the user’s earmark by earmarkToRemove, also reduce the global earmark by the same amount (saturating at zero) to restore consistency:

uint256 paidGlobal = cumulativeEarmarked > earmarkToRemove ? earmarkToRemove : cumulativeEarmarked;
cumulativeEarmarked -= paidGlobal;

This aligns _forceRepay with repay() and redeem() and preserves the global/per‑account earmark invariant.

Proof of Concept

Proof of Concept

Set-up

• Foundry, solc 0.8.28, EVM cancun. No RPC/fork required.

• Test: src/test/AlchemistV3_AuditChecks.t.sol Commands

• Both PoCs:

FOUNDRY_PROFILE=default forge test -vvvv --match-path src/test/AlchemistV3_AuditChecks.t.sol --evm-version cancun

• PoC 1: ForceRepay clears user earmark but not global cumulativeEarmarked

FOUNDRY_PROFILE=default forge test -vvvv --match-test testForceRepayLeavesGlobalEarmarkStale --evm-version cancun

• PoC 2: After ForceRepay on A, global > sum of account earmarks

FOUNDRY_PROFILE=default forge test -vvvv --match-test testGlobalEarmarkExceedsAccountsSumAfterForceRepay --evm-version cancun

workflow

1. Deploy local system: ERC4626 vault (MYT), AlchemistV3, Transmuter, Position NFT.

2. User A: deposit 10k MYT shares, mint ~8k–8.2k debt.

3. Create and mature a Transmuter redemption; call alchemist.poke(A) to apply earmarks.

4. Record pre: A.earmarked, cumulativeEarmarked (cE), Transmuter MYT balance.

5. Tighten collateral limits; call alchemist.liquidate(A) → triggers _forceRepay.

6. Record post: A.earmarked = 0; cE unchanged; Transmuter MYT balance increased.

7. User B: deposit 10k, mint ~6k; alchemist.poke(B) to apply earmarks.

8. Assert: cE > (A.earmarked + B.earmarked) = B.earmarked.

// SPDX-License-Identifier: GPL-3.0-or-later
pragma solidity 0.8.28;

import {Test} from "../../../lib/forge-std/src/Test.sol";
import {IERC20} from "../../../lib/openzeppelin-contracts/contracts/token/ERC20/IERC20.sol";
import {TransparentUpgradeableProxy} from "../../../lib/openzeppelin-contracts/contracts/proxy/transparent/TransparentUpgradeableProxy.sol";

import {AlchemistV3} from "../../AlchemistV3.sol";
import {Transmuter} from "../../Transmuter.sol";
import {AlchemicTokenV3} from "../mocks/AlchemicTokenV3.sol";
import {AlchemistV3Position} from "../../AlchemistV3Position.sol";
import {AlchemistTokenVault} from "../../AlchemistTokenVault.sol";
import {IVaultV2} from "../../../lib/vault-v2/src/interfaces/IVaultV2.sol";
import {console} from "../../../lib/forge-std/src/console.sol";

import {MockMYTVault} from "../mocks/MockMYTVault.sol";
import {MockMYTStrategy} from "../mocks/MockMYTStrategy.sol";
import {MYTTestHelper} from "../libraries/MYTTestHelper.sol";
import {IMYTStrategy} from "../../interfaces/IMYTStrategy.sol";
import {TestERC20} from "../mocks/TestERC20.sol";
import {MockYieldToken} from "../mocks/MockYieldToken.sol";
import {AlchemistInitializationParams} from "../../interfaces/IAlchemistV3.sol";
import {ITransmuter} from "../../interfaces/ITransmuter.sol";

contract AlchemistV3_AuditChecks is Test {
    // Core
    AlchemistV3 alchemist;
    Transmuter transmuter;
    AlchemicTokenV3 alToken;
    AlchemistV3Position positionNFT;
    AlchemistTokenVault feeVault;

    // Vault/MYT
    MockMYTVault vault;
    MockMYTStrategy strategy;
    address admin = address(0xA11CE);
    address curator = address(0xC0DE);

    // Test actors
    address user = address(0xD00D);
    address user2 = address(0xD002);
    address feeReceiver = address(0xFEE);

    // Config
    uint256 timeToTransmute = 10; // small for tests (blocks)
    uint256 protocolFeeBps = 100; // 1%
    uint256 repayFeeBps = 200; // 2%
    uint256 liquidatorFeeBps = 300; // 3%
    uint256 minColl = 12e17; // 1.2
    uint256 lowerBound = 11e17; // 1.1

    function _dealToken(address token, address to, uint256 amount) internal { deal(token, to, amount); }

    function setUp() public {
        // Underlying + vault
        address underlying = address(new TestERC20(1_000_000 ether, 18));
        vault = new MockMYTVault(admin, underlying);

        // Strategy
        strategy = MYTTestHelper._setupStrategy(address(vault), address(new MockYieldToken(underlying)), admin, "Mock", "MockProtocol", IMYTStrategy.RiskClass.LOW);

        // Curator + adapters/caps
        vm.prank(admin);
        vault.setCurator(curator);
        bytes memory idData = strategy.getIdData();
        vm.prank(curator);
        vault.submit(abi.encodeCall(IVaultV2.addAdapter, address(strategy)));
        vm.prank(curator);
        vault.addAdapter(address(strategy));
        uint256 largeCap = 1e27;
        vm.prank(curator);
        vault.submit(abi.encodeCall(IVaultV2.increaseAbsoluteCap, (idData, largeCap)));
        vm.prank(curator);
        vault.increaseAbsoluteCap(idData, largeCap);
        vm.prank(curator);
        vault.submit(abi.encodeCall(IVaultV2.increaseRelativeCap, (idData, 1e18)));
        vm.prank(curator);
        vault.increaseRelativeCap(idData, 1e18);

        // Seed vault
        address seeder = address(0x5EED);
        _dealToken(vault.asset(), seeder, 1_000_000 ether);
        vm.startPrank(seeder);
        IERC20(vault.asset()).approve(address(vault), type(uint256).max);
        vault.deposit(500_000 ether, seeder);
        vm.stopPrank();

        // Tokens + transmuter
        alToken = new AlchemicTokenV3("alUSD", "alUSD", 0);
        ITransmuter.TransmuterInitializationParams memory tp = ITransmuter.TransmuterInitializationParams({
            syntheticToken: address(alToken),
            feeReceiver: feeReceiver,
            timeToTransmute: timeToTransmute,
            transmutationFee: 10,
            exitFee: 20,
            graphSize: 1_000_000
        });
        transmuter = new Transmuter(tp);

        // Alchemist via proxy
        AlchemistV3 logic = new AlchemistV3();
        AlchemistInitializationParams memory ap = AlchemistInitializationParams({
            admin: admin,
            debtToken: address(alToken),
            underlyingToken: vault.asset(),
            depositCap: type(uint256).max,
            minimumCollateralization: minColl,
            collateralizationLowerBound: lowerBound,
            globalMinimumCollateralization: minColl,
            transmuter: address(transmuter),
            protocolFee: protocolFeeBps,
            protocolFeeReceiver: feeReceiver,
            liquidatorFee: liquidatorFeeBps,
            repaymentFee: repayFeeBps,
            myt: address(vault)
        });
        bytes memory data = abi.encodeWithSelector(AlchemistV3.initialize.selector, ap);
        TransparentUpgradeableProxy proxy = new TransparentUpgradeableProxy(address(logic), address(this), data);
        alchemist = AlchemistV3(address(proxy));

        // Bindings
        alToken.setWhitelist(address(alchemist), true);
        transmuter.setAlchemist(address(alchemist));
        transmuter.setDepositCap(type(uint128).max);

        // Position NFT + fee vault
        positionNFT = new AlchemistV3Position(address(alchemist));
        vm.prank(admin);
        alchemist.setAlchemistPositionNFT(address(positionNFT));
        feeVault = new AlchemistTokenVault(vault.asset(), address(alchemist), admin);
        vm.prank(admin);
        alchemist.setAlchemistFeeVault(address(feeVault));

        // User funding
        _dealToken(vault.asset(), user, 100_000 ether);
        vm.startPrank(user);
        IERC20(vault.asset()).approve(address(vault), type(uint256).max);
        vault.deposit(50_000 ether, user);
        IERC20(address(vault)).approve(address(alchemist), type(uint256).max);
        vm.stopPrank();
    }

    function _createUserPosition(uint256 depositShares, uint256 debtToMint) internal returns (uint256 tokenId) {
        vm.startPrank(user);
        alchemist.deposit(depositShares, user, 0);
        tokenId = positionNFT.tokenOfOwnerByIndex(user, 0);
        alchemist.approveMint(tokenId, user, debtToMint);
        alchemist.mintFrom(tokenId, debtToMint, user);
        vm.roll(block.number + 1);
        vm.stopPrank();
    }

    function _createAndMatureRedemption(uint256 amount) internal returns (uint256 id) {
        vm.startPrank(user);
        deal(address(alToken), user, amount, true);
        IERC20(address(alToken)).approve(address(transmuter), type(uint256).max);
        transmuter.createRedemption(amount);
        uint256 idx = transmuter.balanceOf(user) - 1;
        id = transmuter.tokenOfOwnerByIndex(user, idx);
        vm.stopPrank();
        vm.roll(block.number + timeToTransmute + 1);
    }

    function _fundUserWithShares(address who, uint256 assets) internal returns (uint256 shares) {
        _dealToken(vault.asset(), who, assets);
        vm.startPrank(who);
        IERC20(vault.asset()).approve(address(vault), type(uint256).max);
        shares = vault.deposit(assets, who);
        vm.stopPrank();
    }

    // PoC #1: ForceRepay clears user earmark but not global cumulativeEarmarked
    function testForceRepayLeavesGlobalEarmarkStale() public {
        uint256 tokenId = _createUserPosition(10_000 ether, 8_200 ether);
        _createAndMatureRedemption(2_000 ether);
        alchemist.poke(tokenId);

        (, , uint256 earmarkedBefore) = alchemist.getCDP(tokenId);
        uint256 globalEarmarkedBefore = alchemist.cumulativeEarmarked();
        uint256 transmuterBalBefore = IERC20(address(vault)).balanceOf(address(transmuter));
        assertGt(earmarkedBefore, 0);

        vm.startPrank(admin);
        alchemist.setMinimumCollateralization(1_220_000_000_000_000_000);
        alchemist.setCollateralizationLowerBound(1_220_000_000_000_000_000);
        vm.stopPrank();
        (uint256 amountLq,,) = alchemist.liquidate(tokenId);
        assertGt(amountLq, 0);

        (, , uint256 earmarkedAfter) = alchemist.getCDP(tokenId);
        uint256 globalEarmarkedAfter = alchemist.cumulativeEarmarked();
        uint256 transmuterBalAfter = IERC20(address(vault)).balanceOf(address(transmuter));

        assertEq(earmarkedAfter, 0);
        assertEq(globalEarmarkedAfter, globalEarmarkedBefore, "global earmark stale after forceRepay");
        assertGt(transmuterBalAfter, transmuterBalBefore);
    }

    // PoC #2: After ForceRepay on A, global > sum of account earmarks
    function testGlobalEarmarkExceedsAccountsSumAfterForceRepay() public {
        _fundUserWithShares(user, 20_000 ether);
        _fundUserWithShares(user2, 20_000 ether);

        uint256 tokenA = _createUserPosition(10_000 ether, 8_000 ether);
        vm.startPrank(user2);
        IERC20(address(vault)).approve(address(alchemist), type(uint256).max);
        alchemist.deposit(10_000 ether, user2, 0);
        uint256 tokenB = positionNFT.tokenOfOwnerByIndex(user2, 0);
        alchemist.approveMint(tokenB, user2, 6_000 ether);
        alchemist.mintFrom(tokenB, 6_000 ether, user2);
        vm.roll(block.number + 1);
        vm.stopPrank();

        deal(address(alToken), user, 3_000 ether, true);
        vm.startPrank(user);
        IERC20(address(alToken)).approve(address(transmuter), type(uint256).max);
        transmuter.createRedemption(3_000 ether);
        vm.stopPrank();

        vm.roll(block.number + 5);
        alchemist.poke(tokenA);
        alchemist.poke(tokenB);

        (, , uint256 aEar1) = alchemist.getCDP(tokenA);
        (, , uint256 bEar1) = alchemist.getCDP(tokenB);
        uint256 cum1 = alchemist.cumulativeEarmarked();
        console.log("Pre-forceRepay earmarks A:%s B:%s Global:%s", aEar1, bEar1, cum1);

        vm.startPrank(admin);
        alchemist.setMinimumCollateralization(1_260_000_000_000_000_000);
        alchemist.setCollateralizationLowerBound(1_260_000_000_000_000_000);
        vm.stopPrank();
        alchemist.liquidate(tokenA);

        (, , uint256 aEar2) = alchemist.getCDP(tokenA);
        (, , uint256 bEar2) = alchemist.getCDP(tokenB);
        uint256 cum2 = alchemist.cumulativeEarmarked();
        console.log("Post-forceRepay earmarks A:%s B:%s Global:%s", aEar2, bEar2, cum2);

        assertEq(aEar2, 0);
        uint256 sumAccounts = aEar2 + bEar2;
        assertGt(cum2, sumAccounts, "global earmark exceeds sum of accounts after forceRepay");
    }
}

Output

• PoC 1 asserts A’s earmark becomes 0 while cumulativeEarmarked remains unchanged.

• PoC 2 prints:

console::log("Post-forceRepay earmarks A:%s B:%s Global:%s", 0, 642857142857142857143 [6.428e20], 1500000000000000000000 [1.5e21])

Additional trace cues

• _forceRepay path shows ForceRepay(accountId, amount, creditToYield, protocolFeeTotal) emitted, followed by a transfer of creditToYield MYT to the Transmuter; afterwards, A.earmarked = 0 while cumulativeEarmarked is unchanged.