Frankencoin — Successful challenge + collateral top-up skips cooldown

Source & credit. Reproduction of a public audit finding curated by AuditVault — the original finding: 20018-h-03-when-the-challenge-is-successful-the-user-can-send-toke. Standalone Foundry PoC and full write-up: 20018-h-03-when-the-challenge-is-successful-the-user-can-send-toke_exp in the evm-hack-registry mirror.

Vulnerability classes: vuln/wrong-condition · vuln/direct-drain · vuln/frontrun-exposure

Reproduction: self-contained Foundry PoC with only forge-std — no fork, no RPC. Full trace: output.txt. PoC: test/20018-h-03-when-the-challenge-is-successful-the-user-can-send-toke.sol.

Key info#

TL;DR#

1. On a successful challenge, internalWithdrawCollateral only extends cooldown when remaining collateral is below minimumCollateral.
2. The owner MEV-front-runs end() by transferring matching collateral into the position.
3. After withdraw, balance is still ≥ minimum → cooldown is not extended.
4. Owner immediately mints at the inflated price the challenge was supposed to lock out.

The vulnerable code#

function internalWithdrawCollateral(address target, uint256 amount) internal returns (uint256) {
    IERC20(collateral).transfer(target, amount);
    uint256 balance = collateralBalance();
    // @> VULN: cooldown only extended when balance < minimumCollateral
    if (balance < minimumCollateral) {
        cooldown = expiration;
    }
    return balance;
}

Fix: always extend cooldown on a successful challenge (e.g. 1 day), not only when balance drops below minimum.

Root cause#

The cooldown extension is gated on the post-withdraw balance rather than on the fact that a challenge succeeded. Any external ERC20 transfer into the position before end() can keep the balance above the threshold and silently disable the intended minting freeze.

Attack walkthrough#

1. Position holds exactly minimumCollateral at an inflated price.
2. Challenge covers full collateral; period already elapsed.
3. Owner donates minimumCollateral into the position (front-run).
4. end() withdraws one unit; one unit remains → if (balance < minimum) is false.
5. Owner mints price ZCHF against the remaining collateral.

Diagrams#

Impact#

A successful challenge no longer freezes minting. The owner can mint large ZCHF against residual minimum collateral at the pre-challenge inflated price — direct under-collateralized debt creation.

Taxonomy#

• genome: wrong-condition, direct-drain, frontrun-exposure
• sector: lending
• severity: high
• platform: code4rena

Sources#

• AuditVault finding #20018
• Code4rena report 2023-04-frankencoin
• Reduced from code-423n4/2023-04-frankencoin@1022cb1 (Position.internalWithdrawCollateral)

Sources & further analysis#

Reproductions & code

• Standalone PoC + full trace: 20018-h-03-when-the-challenge-is-successful-the-user-can-send-toke_exp (evm-hack-registry mirror).
• AuditVault finding: 20018-h-03-when-the-challenge-is-successful-the-user-can-send-toke.

Alerts & third-party analyses

• Web3Sec X hacked database: search.
• Rekt leaderboard: search.
• Solodit incident search: search.

These dashboards index community alerts tweets, post-mortems, and independent write-ups. Reach them through the protocol name above to cross-check this reproduction against other analyses.