Alleged “white-hat” hackers have returned 3,400 Bitcoin, worth roughly $262.6 million, of the approximately 4,000 Bitcoin they drained from the federation wallet of Liquid Network, a Bitcoin sidechain developed by Blockstream.
A Weekend Heist That Froze the Network
Liquid disclosed the incident on a Sunday, disabling its nodes and suspending all transactions in response. The stolen funds came from Liquid’s federation wallet, which held approximately 4,200 Bitcoin before the attack. Liquid said the funds were withdrawn via the SideSwap Peg-out Authorization Key, but that the key itself, along with other keys in the system, was not compromised — leaving the precise mechanism of the theft unclear. The company said exchanges had been notified and had paused or would pause LBTC deposits and withdrawals, while other assets on the network, including USDT, DePix and real-world assets, were unaffected.
A Conditional Return
The theft was claimed by attackers describing themselves as white-hat hackers, who said in a public blockchain message that they would return most of the stolen funds once Liquid fixed the underlying vulnerability: “Please fix the bug first. The chain is under risk at latest commit right now. Make sure every node is patched. Then we will transfer the money back safely after confirming the fix.”
On Monday, the attackers followed through by returning 3,400 Bitcoin. Former Blockstream executive Samson Mow said approximately 598 Bitcoin, worth about $47 million, remained outstanding as Blockstream continued communicating with the hackers. Mow said the network would stay paused while Blockstream and federation members complete additional fixes and security improvements, resolve a resulting chain split, and prepare for a safe restart, adding that Liquid wallets and services would remain affected in the meantime.
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