4,000 BTC Vanish from Liquid Sidechain: An Authorized Withdrawal or a Bug-Generated Asset?

Liquid's Bitcoin sidechain was paused after approximately 4,000 BTC left a wallet controlled by its federation. The withdrawal used SideSwap's Peg-Out Authorization Key (PAK), but Liquid maintained that neither this key nor its other authorization keys had been compromised.

Sidswap processed an authorized peg-out, but the disputed L-BTC may have been bug-created. Valid authorization did not prove legitimate issuance, and Bitcoin's base network was not compromised.

Liquid disabled its bridge nodes, preventing new transactions from being submitted, and asked exchanges to suspend L-BTC deposits and withdrawals while federation members investigated the incident.