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treasury.updateYieldsFromLiquidatedLrts() updates the yield in the current chain, but collateral may be in the other chain

Crit/HighAutonomint·Sherlock · Hedged stablecoin · 4th December 2024CodebaseH-37

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Summary

treasury.updateYieldsFromLiquidatedLrts() updates the yield from liquidated collateral in the current chain, but this collateral could have been present in the other chain. As such, it will allow the protocol to withdrawal yields that it should not in the current chain, which means other deposited collateral may not be withdrawn due to having been allocated as yield instead.

Root Cause

In CDSLib::667, the treasury is updated with liquidated collateral yield, but this yield may be present in the other chain.

Internal pre-conditions

None.

External pre-conditions

None.

Attack Path

  1. Borrower is liquidated in chain B.
  2. Some time passes and a cds depositor in chain A withdraws a part of the collateral, and updates the treasury with yield generated.
  3. The yield generated is not actually present in chain A, and is in chain B instead, so it will add yield to the treasury that is not actually backed in chain A.
  4. Protocol withdraws the yield in chain A, which is taken from other borrower deposits, who may not be able to withdraw due to lack of liquidity (or similar).

Impact

Lack of funds in chain A, leading to DoSed withdrawals.

PoC

None.

Mitigation

The yields should always be set in the chain that the liquidation happened and the collateral is held.