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Account for MetaMorpho V1.1 lost assets in ARM NAV - #342

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nicka/fix-lost-assets
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Account for MetaMorpho V1.1 lost assets in ARM NAV#342
naddison36 wants to merge 1 commit into
mainfrom
nicka/fix-lost-assets

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@naddison36

@naddison36 naddison36 commented Aug 24, 2026

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Summary

Fixes ARM NAV accounting for MetaMorpho V1.1 vaults following underlying bad debt.

MetaMorpho V1.1 includes lostAssets in totalAssets(), preventing its reported share price from falling after a loss. The ARM previously trusted convertToAssets(), which could overstate recoverable assets and incorrectly socialize losses between LPs.

Changes

  • Adds MetaMorphoV1_1Market, which values vault shares using:
    • Idle assets held by the vault.
    • Actual positions across its Morpho Blue withdrawal queue.
    • Accrued interest and Morpho protocol fees.
    • Pending MetaMorpho performance-fee shares.
  • Recognizes losses before they are persisted to lostAssets.
  • Removes the generic MorphoMarket implementation because all production Morpho ARM markets use MetaMorpho V1.1.
  • Adds deployment scripts to:
    • Upgrade the WETH ARM market through the 5/8 multisig.
    • Upgrade the Lido ARM market through governance.
  • Updates deployment and reward-task references to the versioned implementation.

Testing

Added unit coverage for:

  • Normal accounting without losses.
  • Persisted lostAssets.
  • Newly detected losses not yet persisted.
  • Pending performance-fee dilution.
  • Idle assets held directly by the MetaMorpho vault.

Full project build and all new accounting tests pass.

Deploy scripts to upgrade the WETH ARM and Lido ARM lending markets
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