58799 sc high forcerepay does not reduce cumulativeearmarked which leads to wrong accounting users debts are incorrectly higher which can cause wrongful liquidations

Submitted on Nov 4th 2025 at 13:57:39 UTC by @x0xmechanic for Audit Comp | Alchemix V3

• Report ID: #58799

• Report Type: Smart Contract

• Report severity: High

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

• Impacts:

  • Theft of unclaimed yield

Description

Brief/Intro

cumulativeEarmarked is not reduced in _forceRepay when a user gets liquidated, even though the user's own earmarked debt was properly reduced. This causes wrong global accounting which reflects in how users' debts are calculated: they stay higher than they should be, leading to wrongful liquidations and loss of users funds.

Vulnerability Details

_forceRepay() clears a user’s local earmark but never adjusts the global earmark counter cumulativeEarmarked. This desynchronizes per-account vs global bookkeeping and poisons subsequent earmark/redemption math.

Key lines:

// forceRepay: local removal only
uint256 earmarkToRemove = credit > account.earmarked ? account.earmarked : credit;
account.earmarked -= earmarkToRemove;          // LOCAL ONLY
// ...no write to cumulativeEarmarked

Contrast with _earmark() which increases the global counter:

// earmark: GLOBAL increment
cumulativeEarmarked += amount;

Impact Details

• Users who should receive redemption credit (earmarked yield used to reduce their debt) don’t receive it because cumulativeEarmarked is overstated. positions can appear more undercollateralized than reality (debt not decaying as it should), leading to premature/extra liquidations and lost fee rebates.

References

Add any relevant links to documentation or code

Proof of Concept

Proof of Concept

We show the bug with two users who deposit and mint in the alchemist. One user gets liquidated and his earmarked debt goes to zero, while the cumulative earmarked does not change before and after the liquidation. The other user's debt also does not change.

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

import {IERC20} from "../../lib/openzeppelin-contracts/contracts/token/ERC20/IERC20.sol";
import {IERC721} from "@openzeppelin/contracts/token/ERC721/IERC721.sol";

import {TransparentUpgradeableProxy} from "../../lib/openzeppelin-contracts/contracts/proxy/transparent/TransparentUpgradeableProxy.sol";
import {SafeCast} from "../libraries/SafeCast.sol";
import {Test} from "../../lib/forge-std/src/Test.sol";
import {SafeERC20} from "../libraries/SafeERC20.sol";
import {console} from "../../lib/forge-std/src/console.sol";
import {AlchemistV3} from "../AlchemistV3.sol";
import {AlchemicTokenV3} from "../test/mocks/AlchemicTokenV3.sol";
import {Transmuter} from "../Transmuter.sol";
import {AlchemistV3Position} from "../AlchemistV3Position.sol";

import {Whitelist} from "../utils/Whitelist.sol";
import {TestERC20} from "./mocks/TestERC20.sol";
import {TestYieldToken} from "./mocks/TestYieldToken.sol";
import {TokenAdapterMock} from "./mocks/TokenAdapterMock.sol";
import {IAlchemistV3, IAlchemistV3Errors, AlchemistInitializationParams} from "../interfaces/IAlchemistV3.sol";
import {ITransmuter} from "../interfaces/ITransmuter.sol";
import {ITestYieldToken} from "../interfaces/test/ITestYieldToken.sol";
import {InsufficientAllowance} from "../base/Errors.sol";
import {Unauthorized, IllegalArgument, IllegalState, MissingInputData} from "../base/Errors.sol";
import {AlchemistNFTHelper} from "./libraries/AlchemistNFTHelper.sol";
import {IAlchemistV3Position} from "../interfaces/IAlchemistV3Position.sol";
import {AggregatorV3Interface} from "../../lib/chainlink-brownie-contracts/contracts/src/v0.8/shared/interfaces/AggregatorV3Interface.sol";
import {TokenUtils} from "../libraries/TokenUtils.sol";
import {AlchemistTokenVault} from "../AlchemistTokenVault.sol";
import {MockMYTStrategy} from "./mocks/MockMYTStrategy.sol";
import {MYTTestHelper} from "./libraries/MYTTestHelper.sol";
import {IMYTStrategy} from "../interfaces/IMYTStrategy.sol";
import {MockAlchemistAllocator} from "./mocks/MockAlchemistAllocator.sol";
import {IMockYieldToken} from "./mocks/MockYieldToken.sol";
import {IVaultV2} from "../../lib/vault-v2/src/interfaces/IVaultV2.sol";
import {VaultV2} from "../../lib/vault-v2/src/VaultV2.sol";
import {MockYieldToken} from "./mocks/MockYieldToken.sol";

contract ForceRepayTest is Test {
    // ----- [SETUP] Variables for setting up a minimal CDP -----

    // Callable contract variables
    AlchemistV3 alchemist;
    Transmuter transmuter;
    AlchemistV3Position alchemistNFT;
    AlchemistTokenVault alchemistFeeVault;

    // // Proxy variables
    TransparentUpgradeableProxy proxyAlchemist;
    TransparentUpgradeableProxy proxyTransmuter;

    // // Contract variables
    // CheatCodes cheats = CheatCodes(HEVM_ADDRESS);
    AlchemistV3 alchemistLogic;
    Transmuter transmuterLogic;
    AlchemicTokenV3 alToken;
    Whitelist whitelist;

    // Parameters for AlchemicTokenV2
    string public _name;
    string public _symbol;
    uint256 public _flashFee;
    address public alOwner;

    mapping(address => bool) users;

    uint256 public constant FIXED_POINT_SCALAR = 1e18;

    uint256 public constant BPS = 10_000;

    uint256 public protocolFee = 100;

    uint256 public liquidatorFeeBPS = 300; // in BPS, 3%

    uint256 public minimumCollateralization = uint256(FIXED_POINT_SCALAR * FIXED_POINT_SCALAR) / 9e17;

    // ----- Variables for deposits & withdrawals -----

    // account funds to make deposits/test with
    uint256 accountFunds;

    // large amount to test with
    uint256 whaleSupply;

    // amount of yield/underlying token to deposit
    uint256 depositAmount;

    // minimum amount of yield/underlying token to deposit
    uint256 minimumDeposit = 1000e18;

    // minimum amount of yield/underlying token to deposit
    uint256 minimumDepositOrWithdrawalLoss = FIXED_POINT_SCALAR;

    address public user1 = address(0x1111);

    // random EOA for testing
    address externalUser = address(0x69E8cE9bFc01AA33cD2d02Ed91c72224481Fa420);

    // another random EOA for testing
    address anotherExternalUser = address(0x420Ab24368E5bA8b727E9B8aB967073Ff9316969);

    // another random EOA for testing
    address yetAnotherExternalUser = address(0x520aB24368e5Ba8B727E9b8aB967073Ff9316961);

    // another random EOA for testing
    address someWhale = address(0x521aB24368E5Ba8b727e9b8AB967073fF9316961);

    // WETH address
    address public weth = address(0xC02aaA39b223FE8D0A0e5C4F27eAD9083C756Cc2);

    address public protocolFeeReceiver = address(10);

    // MYT variables
    VaultV2 vault;
    MockAlchemistAllocator allocator;
    MockMYTStrategy mytStrategy;
    address public operator = address(0x2222222222222222222222222222222222222222); // default operator
    address public admin = address(0x4444444444444444444444444444444444444444); // DAO OSX
    address public curator = address(0x8888888888888888888888888888888888888888);
    address public mockVaultCollateral = address(new TestERC20(100e18, uint8(18)));
    address public mockStrategyYieldToken = address(new MockYieldToken(mockVaultCollateral));
    uint256 public defaultStrategyAbsoluteCap = 2_000_000_000e18;
    uint256 public defaultStrategyRelativeCap = 1e18; // 100%

    struct CalculateLiquidationResult {
        uint256 liquidationAmountInYield;
        uint256 debtToBurn;
        uint256 outSourcedFee;
        uint256 baseFeeInYield;
    }

    struct AccountPosition {
        address user;
        uint256 collateral;
        uint256 debt;
        uint256 tokenId;
    }

    function setUp() external {
        adJustTestFunds(18);
        setUpMYT(18);
        deployCoreContracts(18);
    }

    function adJustTestFunds(uint256 alchemistUnderlyingTokenDecimals) public {
        accountFunds = 200_000 * 10 ** alchemistUnderlyingTokenDecimals;
        whaleSupply = 20_000_000_000 * 10 ** alchemistUnderlyingTokenDecimals;
        depositAmount = 200_000 * 10 ** alchemistUnderlyingTokenDecimals;
    }

    function setUpMYT(uint256 alchemistUnderlyingTokenDecimals) public {
        vm.startPrank(admin);
        uint256 TOKEN_AMOUNT = 1_000_000; // Base token amount
        uint256 initialSupply = TOKEN_AMOUNT * 10 ** alchemistUnderlyingTokenDecimals;
        mockVaultCollateral = address(new TestERC20(initialSupply, uint8(alchemistUnderlyingTokenDecimals)));
        mockStrategyYieldToken = address(new MockYieldToken(mockVaultCollateral));
        vault = MYTTestHelper._setupVault(mockVaultCollateral, admin, curator);
        mytStrategy = MYTTestHelper._setupStrategy(address(vault), mockStrategyYieldToken, admin, "MockToken", "MockTokenProtocol", IMYTStrategy.RiskClass.LOW);
        allocator = new MockAlchemistAllocator(address(vault), admin, operator);
        vm.stopPrank();
        vm.startPrank(curator);
        _vaultSubmitAndFastForward(abi.encodeCall(IVaultV2.setIsAllocator, (address(allocator), true)));
        vault.setIsAllocator(address(allocator), true);
        _vaultSubmitAndFastForward(abi.encodeCall(IVaultV2.addAdapter, address(mytStrategy)));
        vault.addAdapter(address(mytStrategy));
        bytes memory idData = mytStrategy.getIdData();
        _vaultSubmitAndFastForward(abi.encodeCall(IVaultV2.increaseAbsoluteCap, (idData, defaultStrategyAbsoluteCap)));
        vault.increaseAbsoluteCap(idData, defaultStrategyAbsoluteCap);
        _vaultSubmitAndFastForward(abi.encodeCall(IVaultV2.increaseRelativeCap, (idData, defaultStrategyRelativeCap)));
        vault.increaseRelativeCap(idData, defaultStrategyRelativeCap);
        vm.stopPrank();
    }

    function _magicDepositToVault(address vault, address depositor, uint256 amount) internal returns (uint256) {
        deal(address(mockVaultCollateral), address(depositor), amount);
        vm.startPrank(depositor);
        TokenUtils.safeApprove(address(mockVaultCollateral), vault, amount);
        uint256 shares = IVaultV2(vault).deposit(amount, depositor);
        vm.stopPrank();
        return shares;
    }

    function _vaultSubmitAndFastForward(bytes memory data) internal {
        vault.submit(data);
        bytes4 selector = bytes4(data);
        vm.warp(block.timestamp + vault.timelock(selector));
    }

    function deployCoreContracts(uint256 alchemistUnderlyingTokenDecimals) public {
        // test maniplulation for convenience
        address caller = address(0xdead);
        address proxyOwner = address(this);
        vm.assume(caller != address(0));
        vm.assume(proxyOwner != address(0));
        vm.assume(caller != proxyOwner);
        vm.startPrank(caller);

        // Fake tokens
        alToken = new AlchemicTokenV3(_name, _symbol, _flashFee);

        ITransmuter.TransmuterInitializationParams memory transParams = ITransmuter.TransmuterInitializationParams({
            syntheticToken: address(alToken),
            feeReceiver: address(this),
            timeToTransmute: 5_256_000,
            transmutationFee: 10,
            exitFee: 20,
            graphSize: 52_560_000
        });

        // Contracts and logic contracts
        alOwner = caller;
        transmuterLogic = new Transmuter(transParams);
        alchemistLogic = new AlchemistV3();
        whitelist = new Whitelist();

        // AlchemistV3 proxy
        AlchemistInitializationParams memory params = AlchemistInitializationParams({
            admin: alOwner,
            debtToken: address(alToken),
            underlyingToken: address(vault.asset()),
            depositCap: type(uint256).max,
            minimumCollateralization: minimumCollateralization,
            collateralizationLowerBound: 1_052_631_578_950_000_000, // 1.05 collateralization
            globalMinimumCollateralization: 1_111_111_111_111_111_111, // 1.1
            transmuter: address(transmuterLogic),
            protocolFee: 0,
            protocolFeeReceiver: protocolFeeReceiver,
            liquidatorFee: liquidatorFeeBPS,
            repaymentFee: 100,
            myt: address(vault)
        });

        bytes memory alchemParams = abi.encodeWithSelector(AlchemistV3.initialize.selector, params);
        proxyAlchemist = new TransparentUpgradeableProxy(address(alchemistLogic), proxyOwner, alchemParams);
        alchemist = AlchemistV3(address(proxyAlchemist));

        // Whitelist alchemist proxy for minting tokens
        alToken.setWhitelist(address(proxyAlchemist), true);

        whitelist.add(address(0xbeef));
        whitelist.add(address(user1));
        whitelist.add(externalUser);
        whitelist.add(anotherExternalUser);

        transmuterLogic.setAlchemist(address(alchemist));
        transmuterLogic.setDepositCap(uint256(type(int256).max));

        alchemistNFT = new AlchemistV3Position(address(alchemist));
        alchemist.setAlchemistPositionNFT(address(alchemistNFT));

        alchemistFeeVault = new AlchemistTokenVault(address(vault.asset()), address(alchemist), alOwner);
        alchemistFeeVault.setAuthorization(address(alchemist), true);
        alchemist.setAlchemistFeeVault(address(alchemistFeeVault));

        _magicDepositToVault(address(vault), address(0xbeef), accountFunds);
        _magicDepositToVault(address(vault), user1, accountFunds);
        _magicDepositToVault(address(vault), address(0xdad), accountFunds);
        _magicDepositToVault(address(vault), externalUser, accountFunds);
        _magicDepositToVault(address(vault), yetAnotherExternalUser, accountFunds);
        _magicDepositToVault(address(vault), anotherExternalUser, accountFunds);
        vm.stopPrank();

        vm.startPrank(address(admin));
        allocator.allocate(address(mytStrategy), vault.convertToAssets(vault.totalSupply()));
        vm.stopPrank();

        deal(address(alToken), address(0xdad), accountFunds);
        deal(address(alToken), address(anotherExternalUser), accountFunds);
        deal(address(vault.asset()), address(0xbeef), accountFunds);
        deal(address(vault.asset()), user1, accountFunds);
        deal(address(vault.asset()), externalUser, accountFunds);
        deal(address(vault.asset()), yetAnotherExternalUser, accountFunds);
        deal(address(vault.asset()), anotherExternalUser, accountFunds);
        deal(address(vault.asset()), alchemist.alchemistFeeVault(), 10_000 * (10 ** alchemistUnderlyingTokenDecimals));

        vm.startPrank(anotherExternalUser);
        SafeERC20.safeApprove(address(vault.asset()), address(vault), accountFunds);
        vm.stopPrank();

        vm.startPrank(yetAnotherExternalUser);
        SafeERC20.safeApprove(address(vault.asset()), address(vault), accountFunds);
        vm.stopPrank();

        vm.startPrank(someWhale);
        deal(address(vault), someWhale, whaleSupply);
        deal(address(vault.asset()), someWhale, whaleSupply);
        SafeERC20.safeApprove(address(vault.asset()), address(mockStrategyYieldToken), whaleSupply);
        vm.stopPrank();
    }

    function testLiquidate_Undercollateralized_Position_With_Earmarked_Debt_Sufficient_Repayment() external {
        vm.startPrank(someWhale);
        IMockYieldToken(mockStrategyYieldToken).mint(whaleSupply, someWhale);
        vm.stopPrank();

        // just ensureing global alchemist collateralization stays above the minimum required for regular liquidations
        // no need to mint anything
        vm.startPrank(yetAnotherExternalUser);
        SafeERC20.safeApprove(address(vault), address(alchemist), depositAmount * 2);
        alchemist.deposit(depositAmount, yetAnotherExternalUser, 0);
        uint256 tokenIdForyetAnotherExternalUser = AlchemistNFTHelper.getFirstTokenId(yetAnotherExternalUser, address(alchemistNFT));
        uint256 mintAmountYetAnotherExternalUser = alchemist.totalValue(tokenIdForyetAnotherExternalUser) * FIXED_POINT_SCALAR / minimumCollateralization;
        alchemist.mint(tokenIdForyetAnotherExternalUser, mintAmountYetAnotherExternalUser, address(0xbeef));
        vm.stopPrank();

        vm.startPrank(address(0xbeef));
        SafeERC20.safeApprove(address(vault), address(alchemist), depositAmount + 100e18);
        alchemist.deposit(depositAmount, address(0xbeef), 0);
        // a single position nft would have been minted to 0xbeef
        uint256 tokenIdFor0xBeef = AlchemistNFTHelper.getFirstTokenId(address(0xbeef), address(alchemistNFT));
        uint256 mintAmount = alchemist.totalValue(tokenIdFor0xBeef) * FIXED_POINT_SCALAR / minimumCollateralization;

        alchemist.mint(tokenIdFor0xBeef, mintAmount, address(0xbeef));
        vm.stopPrank();

        // Need to start a transmutator deposit, to start earmarking debt
        vm.startPrank(anotherExternalUser);
        SafeERC20.safeApprove(address(alToken), address(transmuterLogic), mintAmount);
        transmuterLogic.createRedemption(mintAmount);
        vm.stopPrank();

        uint256 transmuterPreviousBalance = IERC20(address(vault)).balanceOf(address(transmuterLogic));

        // skip to a future block. Lets say 60% of the way through the transmutation period (5_256_000 blocks)
        vm.roll(block.number + (5_256_000 * 60 / 100));

        // modify yield token price via modifying underlying token supply
        uint256 initialVaultSupply = IERC20(address(mockStrategyYieldToken)).totalSupply();
        IMockYieldToken(mockStrategyYieldToken).updateMockTokenSupply(initialVaultSupply);
        // increasing yeild token suppy by 59 bps or 5.9%  while keeping the unederlying supply unchanged
        uint256 modifiedVaultSupply = (initialVaultSupply * 590 / 10_000) + initialVaultSupply;
        IMockYieldToken(mockStrategyYieldToken).updateMockTokenSupply(modifiedVaultSupply);

        alchemist.poke(tokenIdFor0xBeef);
        alchemist.poke(tokenIdForyetAnotherExternalUser);

        (, uint256 prevDebtExternalUser,) = alchemist.getCDP(tokenIdForyetAnotherExternalUser);
        (uint256 prevCollateral, uint256 prevDebt, uint256 earmarked) = alchemist.getCDP(tokenIdFor0xBeef);
        // ensure initial debt is correct
        vm.assertApproxEqAbs(prevDebt, 180_000_000_000_000_000_018_000, minimumDepositOrWithdrawalLoss);

        // Earmarked debt should be 60% of the total debt
        //require(earmarked == prevDebt * 60 / 100, "Earmarked debt should be 60% of the total debt");
        console.log("beef earmarked before liquidation:", earmarked);
        //cumulative earmarked before liquidation
        uint256 cumulativeEarmarkedBeforeLiquidation = alchemist.cumulativeEarmarked();
        console.log("cumulative Earmarked Before Liquidation", cumulativeEarmarkedBeforeLiquidation);

        // let another user liquidate the previous user position
        vm.startPrank(externalUser);
        uint256 liquidatorPrevTokenBalance = IERC20(address(vault)).balanceOf(address(externalUser));
        uint256 liquidatorPrevUnderlyingBalance = IERC20(vault.asset()).balanceOf(address(externalUser));
        (uint256 assets, uint256 feeInYield, uint256 feeInUnderlying) = alchemist.liquidate(tokenIdFor0xBeef);
        (uint256 depositedCollateral, uint256 debt, uint256 earmarkedAfter) = alchemist.getCDP(tokenIdFor0xBeef);

        vm.stopPrank();

        alchemist.poke(tokenIdFor0xBeef);

        console.log("beef earmarked after liquidation:", earmarkedAfter);
        vm.assertEq(earmarkedAfter, 0);

        //cumulative earmarked after liquidation
        uint256 cumulativeEarmarkedAfterLiquidation = alchemist.cumulativeEarmarked();
        console.log("cumulative Earmarked After Liquidation", cumulativeEarmarkedAfterLiquidation);

        vm.assertEq(cumulativeEarmarkedBeforeLiquidation, cumulativeEarmarkedAfterLiquidation);

        alchemist.poke(tokenIdForyetAnotherExternalUser);

        (, uint256 DebtExternalUser,) = alchemist.getCDP(tokenIdForyetAnotherExternalUser);
        vm.assertEq(prevDebtExternalUser, DebtExternalUser);
    }

}