Liquidity Management
Gamma
DeFiFoundry
50,000 USDC
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Submission Details
Severity: low
Invalid

Improper Handling of Transfer Failures

kimnoic

Summary

A critical vulnerability exists in the asset withdrawal process where failed token transfers to user addresses result in irreversible fund loss. When a transfer to the user's address fails, the protocol incorrectly redirects the funds to the treasury without providing a recovery mechanism, permanently locking user assets and creating governance risks.

Vulnerability Details

Affected Code

function _transferToken(uint256 depositId, uint256 amount) internal {
// ...
try {
collateralToken.transfer(recipient, amount - fee);
} catch {
// Funds sent to treasury on failure
collateralToken.transfer(treasury, amount - fee);
emit TokenTranferFailed(recipient, amount - fee);
}
totalDepositAmount -= depositInfo[depositId].amount;
// ...
}

Root Cause

  1. Irreversible Fund Redirection:

    • The try/catch block unconditionally sends failed transfer amounts to the treasury, assuming all failures are unrecoverable.

    • No safeguards exist to retain or allow users to retry failed transfers.

  2. Failure to Handle ERC-20 Edge Cases:

    • ERC-20 tokens may reject transfers to non-functional contracts (e.g., addresses without fallback()/receive() functions).

    • Malicious users could intentionally use incompatible addresses to force fund redirection.

  3. Lack of State Tracking:

    • Failed transfers are not logged in a recoverable state (e.g., pending withdrawals), making user recourse impossible.

    • The TokenTransferFailed event provides no actionable data (e.g., failure reason or retry parameters).

Attack Scenario

  1. Step 1: A user initiates a withdrawal to a non-receiving contract address (e.g., a tokenized NFT contract without ERC-20 support).

  2. Step 2: The collateralToken.transfer() call fails due to the recipient contract's inability to handle ERC-20 transfers.

  3. Step 3: The catch block executes, sending the user's amount - fee to the treasury.

  4. Result:

    • The user permanently loses access to their funds.

    • The treasury accumulates "dead funds" that cannot be legitimately allocated.

Impact

  • Permanent User Fund Loss: Users withdrawing to incompatible addresses lose assets irreversibly.

  • Governance Conflicts: Treasury accumulation of misdirected funds may lead to disputes over ownership/usage.

  • Reputational Damage: Protocol credibility is eroded due to poor fund recovery mechanisms.

  • Incentivized Griefing: Malicious actors could exploit this to drain funds via "kamikaze" withdrawals to unusable addresses.

Updates

Lead Judging Commences

n0kto Lead Judge 9 months ago
Submission Judgement Published
Invalidated
Reason: Design choice
Assigned finding tags:

Admin is trusted / Malicious keepers

Please read the CodeHawks documentation to know which submissions are valid. If you disagree, provide a coded PoC and explain the real likelihood and the detailed impact on the mainnet without any supposition (if, it could, etc) to prove your point. Keepers are added by the admin, there is no "malicious keeper" and if there is a problem in those keepers, that's out of scope. ReadMe and known issues states: " * System relies heavily on keeper for executing trades * Single keeper point of failure if not properly distributed * Malicious keeper could potentially front-run or delay transactions * Assume that Keeper will always have enough gas to execute transactions. There is a pay execution fee function, but the assumption should be that there's more than enough gas to cover transaction failures, retries, etc * There are two spot swap functionalies: (1) using GMX swap and (2) using Paraswap. We can assume that any swap failure will be retried until success. " " * Heavy dependency on GMX protocol functioning correctly * Owner can update GMX-related addresses * Changes in GMX protocol could impact system operations * We can assume that the GMX keeper won't misbehave, delay, or go offline. " "Issues related to GMX Keepers being DOS'd or losing functionality would be considered invalid."

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