Retrospective: PAXG/USDC market oracle configuration

Vaults LeadBlock
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  • No user funds were lost
  • This retrospective is regarding the new PAXG/USDC market (LLTV=91.5%, 0xDd1778F71a4a1C6A0eFebd8AE9f8848634CE1101, AdaptiveCurve) with market ID 0x8eaf7b29f02ba8d8c1d7aeb587403dcb16e2e943e4e2f5f94b0963c2386406c9
  • The oracle for the new market was incorrectly setup by our oracle provider and we then implemented it in the market leading to a situation where users were able to borrow more than they should have
  • We had limited exposure upon discovery, it was our smallest market (4% of vault allocation)
  • The borrow that occured was not a malicious action and was fully repaid to the vault and the lender who deposited in the market
  • There are currently no further lender funds exposed both from a vault or direct lender perspective
  • The market should not be used and does not reflect repayments to the direct lender as these were done outside of Morpho to avoid malicious players
  • There are no issues with Morpho’s smart contracts, the protocol has operated as expected
  • We have implemented new processes during market creation and testing to catch such issues before launch
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Thanks to the team for their updates. We have a few questions some of these two statements as looking at the transactions for that specific market, we’re led to believe that the initial borrower who took advantage of this mistake did not fully repay their vault and that some direct lenders have been exposed to this bad debt.

The transactions on this market: Morpho | Market show the initial borrower who was able to borrow 230k USDC using $350 of PAXG still has around 17.8k USDC borrowed using less than $0.01 of collateral. As far as we can tell, this borrow was not fully repaid?

It’s great to see that all of LeadBlocks depositors were not harmed, however, looking at the current market, it seems this address: 0xf9F061d9a5f04E223ed3c560E03A8AB0A70Cc1c4 that deposited directly to the market has about 95k USDC. This is being all borrowed out using ~$150 of collateral from 3 addresses. We assume this 95k USDC can be written off as bad debt?

Again, please let us know if there’s anything we’re missing here as we are simply just looking at Morpho’s front end UI.

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