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Liquid Network Withdraws 4,000 Bitcoin From Federation Wallet Following Software Bug

Liquid Network reported that purported white-hat hackers withdrew approximately 4,000 bitcoin from its federation wallet, a value of roughly $320 million. The withdrawal occurred because of a software bug in the Elements software that created extra L-BTC tokens. The hackers utilized the SideSwap Peg-out Authorization Key to move the funds, which were treated as valid by the federation members' security servers. In response to the breach, Liquid Network paused all new transactions and disabled bridge nodes. The network remains active in producing blocks, but deposits and withdrawals at exchanges are suspended. Blockstream, the company that founded Liquid Network, communicated with the hackers via on-chain messages. The hackers promised to return the funds once the network maintainers confirmed the bug was fixed and every node was patched. Blockstream confirmed that the bridge nodes were patched and it is now safe to return the funds. The hackers currently hold the bitcoin in a wallet and have not yet transferred it back to the federation. The theft follows a series of security breaches in the cryptocurrency market this year.

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