Note: At the judges request here, this downgraded issue from the same warden has been included in this report for completeness.
 https://github.com/code-423n4/2024-02-althea-liquid-infrastructure/blob/bd6ee47162368e1999a0a5b8b17b701347cf9a7d/liquid-infrastructure/contracts/LiquidInfrastructureERC20.sol#L224
USDC & USDT implement blacklisting feature to block suspicious users. This can become an issue if one of the approved holders is blacklisted by these tokens as reward distributions are processed in an array. The token transfer to these users will fail and will also brick the distribution system because the blacklisted user is never cleared.
USDC implements a blacklist function and these accounts cannot receive USDC:
The reward distribution is handled in a loop, causing the holder unable to receive the reward, the transfer will not be cleared and the contract will be left DOSd. A malicious holder can also use this as a point of attack by intentionally getting himself blacklisted.
The best solution is to implement a two step withdrawal process in which, the rewards distribution loop increases the users entitlement, then a second claim function with which a user can claim their rewards.
