Liquid Network pauses after actors withdraw $320 million in Bitcoin

Liquid Network paused operations after actors claiming to be white-hat hackers withdrew about 4,000 Bitcoin worth $320 million from its federation wallet. The withdrawn Bitcoin represented roughly 95% of the wallet's approximately 4,200 BTC balance before the incident. Liquid said bridge nodes were disabled, which prevented new transactions. Exchanges halted or were preparing to halt L-BTC deposits and withdrawals. Blockstream, Liquid's technology provider, started contacting the actors through signed onchain messages. The actors told Blockstream to patch the vulnerability and ensure every node was updated before they would return most of the Bitcoin. They also sent encrypted technical details to Blockstream, according to Galaxy Digital research head Alex Thorn. The funds had not been returned at the time of writing. SideSwap said the withdrawal passed through its peg-out service as a customer order using its Peg-out Authorization Key, or PAK. SideSwap said the key was not compromised. SideSwap said the L-BTC used in the transaction originated from a bug in Elements rather than from SideSwap's systems. Liquid said other assets issued on the network, including USDT, DePix and real-world assets, were unaffected. The sidechain remained paused as federation members worked to fix the vulnerability.