Redemption value of synths can be manipulated to drain VaderPool of all native assets

[code423n4]

Handle

TomFrench

Vulnerability details

Impact

Draining of funds from VaderPool

Proof of Concept

See the VaderPool.mintSynth function:
https://github.com/code-423n4/2021-11-vader/blob/607d2b9e253d59c782e921bfc2951184d3f65825/contracts/dex-v2/pool/VaderPoolV2.sol#L126-L167

As the pool's reserves can be manipulated through flashloans similar to on UniswapV2, an attacker may set the exchange rate between nativeAsset and synths (calculated from the reserves). An attacker can exploit this to drain funds from the pool.

1. The attacker first flashloans and sells a huge amount of foreignAsset to the pool. The pool now thinks nativeAsset is extremely valuable.
2. The attacker now uses a relatively small amount of nativeAsset to mint synths using VaderPool.mintSynth. As the pool thinks nativeAsset is very valuable the attacker will receive a huge amount of synths.
3. The attacker can now manipulate the pool in the opposite direction by buying up the foreignAsset they sold to the pool. nativeAsset is now back at its normal price, or perhaps artificially low if the attacker wishes.
4. The attacker now burns all of their synths. As nativeAsset is considered much less valuable than at the point the synths were minted it takes a lot more of nativeAsset in order to pay out for the burned synths.

For the price of a flashloan and some swap fees, the attacker has now managed to extract a large amount of nativeAsset from the pool. This process can be repeated as long as it is profitable.

Recommended Mitigation Steps

Prevent minting of synths or at the very least tie the exchange rate to a manipulation resistant oracle.

[SamSteinGG]

When synths are minted the reserves are skewed positively for the price of the native asset in the example. Can the warden provide a test that highlights this?