Merge pull request #557 from morpho-org/fix/zero-floor-sub-58

`UtilsLib.zeroFloorSub` is not utilised consistently
morpho-org · Nov 8, 2023 · e52ab6b · e52ab6b
2 parents 2ae62b0 + 0e8174f
commit e52ab6b
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Showing 2 changed files with 26 additions and 2 deletions.
diff --git a/src/Morpho.sol b/src/Morpho.sol
@@ -387,9 +387,13 @@ contract Morpho is IMorphoStaticTyping {
         uint256 badDebtShares;
         if (position[id][borrower].collateral == 0) {
             badDebtShares = position[id][borrower].borrowShares;
-            uint256 badDebt = badDebtShares.toAssetsUp(market[id].totalBorrowAssets, market[id].totalBorrowShares);
-            market[id].totalSupplyAssets -= badDebt.toUint128();
+            uint256 badDebt = UtilsLib.min(
+                market[id].totalBorrowAssets,
+                badDebtShares.toAssetsUp(market[id].totalBorrowAssets, market[id].totalBorrowShares)
+            );
+
             market[id].totalBorrowAssets -= badDebt.toUint128();
+            market[id].totalSupplyAssets -= badDebt.toUint128();
             market[id].totalBorrowShares -= badDebtShares.toUint128();
             position[id][borrower].borrowShares = 0;
         }

diff --git a/test/forge/integration/LiquidateIntegrationTest.sol b/test/forge/integration/LiquidateIntegrationTest.sol
@@ -296,4 +296,24 @@ contract LiquidateIntegrationTest is BaseTest {
             morpho.totalSupplyAssets(id), params.totalSupplyBeforeLiquidation - params.expectedBadDebt, "total supply"
         );
     }
+
+    function testBadDebtOverTotalBorrowAssets() public {
+        uint256 collateralAmount = 10 ether;
+        uint256 loanAmount = 1 ether;
+        _supply(loanAmount);
+
+        collateralToken.setBalance(BORROWER, collateralAmount);
+        vm.startPrank(BORROWER);
+        morpho.supplyCollateral(marketParams, collateralAmount, BORROWER, hex"");
+        morpho.borrow(marketParams, loanAmount, 0, BORROWER, BORROWER);
+        // Trick to inflate shares, so that the computed bad debt is greater than the total debt of the market.
+        morpho.borrow(marketParams, 0, 1, BORROWER, BORROWER);
+        vm.stopPrank();
+
+        oracle.setPrice(1e36 / 100);
+
+        loanToken.setBalance(LIQUIDATOR, loanAmount);
+        vm.prank(LIQUIDATOR);
+        morpho.liquidate(marketParams, BORROWER, collateralAmount, 0, hex"");
+    }
 }