Hackers Return 3,400 BTC to Liquid Network After Security Bug

The Liquid sidechain is working to recover after a major security incident saw 4,000 BTC removed from its federation wallet. A group triggered the withdrawal by using a bug in the Elements software to create unauthorized L BTC tokens, which the system then exchanged for real bitcoin. The attackers have since returned 3,400 BTC, leaving about 600 BTC remaining in their possession.

The group stated they acted as white hat hackers, providing vulnerability details to Blockstream and demanding a patch for the network. While Blockstream confirmed that the necessary bridge nodes were updated, some industry figures are questioning the motives behind the incident. Ledger CTO Charles Guillemet suggested that keeping the remaining 600 BTC makes the situation look more like extortion than a typical security audit.

Blockstream is now coordinating a restart of the network, though it remains offline for the time being. Users are advised to avoid sending bitcoin to Liquid peg in addresses until the team confirms the system is fully operational. Other assets on the network, including tether, were not impacted by this event.