$47M Still Missing After Liquid Hack as Blockstream Negotiates with 'White Hats'

The Liquid Network was hacked for around $320 million after a software flaw allowed unbacked L-BTC tokens to be exchanged for reserve Bitcoin. Approximately 4,000 BTC were withdrawn, but 3,400 BTC were returned on Monday, leaving about 600 BTC still missing, valued at roughly $47 million.

Blockstream is in talks with the hackers to recover the remaining funds and resume normal network operations as quickly as possible. The Liquid Network's reserve fell from around 4,205 BTC to 197 BTC after the withdrawal and others processed before operations halted.

The hack was made possible by a flaw in Liquid's underlying Elements software that allowed the creation of unbacked L-BTC tokens, which were then exchanged for reserve Bitcoin through SideSwap. The network has been paused while the issue is being addressed, but users' private keys were not compromised and no other assets, such as USDT, were affected.

Charles Guillemet, Ledger's Chief Technology Officer, expressed skepticism about the hackers' claim to be white-hat security researchers, stating that 'the 'white hats' still hold 600 BTC. If this was ever a negotiated reward under an encrypted contract signed on-chain, it looks more like extortion than white-hat hacking!'