xiaoming90 - Last long position that is underwater will be stuck

[sherlock-admin2]

xiaoming90

high

Last long position that is underwater will be stuck

Summary

The last long position in the system cannot be liquidated, leading to a loss for the LPs as the liquidated position's margin cannot be transferred to the LPs.

Vulnerability Detail

At the end of the liquidation process, it will call the updateGlobalPositionData function.

https://github.com/sherlock-audit/2023-12-flatmoney/blob/main/flatcoin-v1/src/LiquidationModule.sol#L161

File: LiquidationModule.sol
085:     function liquidate(uint256 tokenId) public nonReentrant whenNotPaused liquidationInvariantChecks(vault, tokenId) {
..SNIP..
159:         vault.updateGlobalPositionData({
160:             price: position.lastPrice,
161:             marginDelta: -(int256(position.marginDeposited) + positionSummary.accruedFunding),
162:             additionalSizeDelta: -int256(position.additionalSize) // Since position is being closed, additionalSizeDelta should be negative.
163:         });

Assume that the last LONG position is underwater (settledMargin < 0). For instance, the state of the last long position is as follows:

• Margin = 20 ETH
• Accrued Funding = 0 (For simplicity)
• PnL = -100 ETH

At some point of the liquidation process, the updateGlobalPositionData will be executed to update the global position data:

vault.updateGlobalPositionData({marginDelta: -(position.marginDeposited + positionSummary.accruedFunding)});
vault.updateGlobalPositionData({marginDelta: -(20 + 0)});
vault.updateGlobalPositionData({marginDelta: -20});

profitLossTotal = -100

newMarginDepositedTotal = marginDepositedTotal + _marginDelta + profitLossTotal
newMarginDepositedTotal = 20 + (-20) + (-100)
newMarginDepositedTotal = -20

The profitLossTotal is -100 as it represents the loss incurred by the last long position in the system.

Since the final newMarginDepositedTotal is -20, Line 192 below will revert and cause the liquidation to fail.

File: FlatcoinVault.sol
173:     function updateGlobalPositionData(
..SNIP..
191:         if (newMarginDepositedTotal < 0) {
192:             revert FlatcoinErrors.InsufficientGlobalMargin();
193:         }

As a result, it is not possible to liquidate the last long position in the system.

Impact

The last long position in the system cannot be liquidated, leading to a loss for the LPs as the liquidated position's margin cannot be transferred to the LPs.

Code Snippet

https://github.com/sherlock-audit/2023-12-flatmoney/blob/main/flatcoin-v1/src/LiquidationModule.sol#L161

Tool used

Manual Review

Recommendation

Update the liquidation function so that the last long position in the system can be liquidated successfully.

[sherlock-admin]

1 comment(s) were left on this issue during the judging contest.

takarez commented:

valid: last position should be liquidated: high(5)

[rashtrakoff]

Hello, I believe this is an invalid issue given that there is a test which replicates this. Would be keen to know if you can produce a PoC.