Liquid Hackers Exploit Elements Bug to Steal $320M in BTC
Liquid, a decentralized exchange and liquidity network for Bitcoin (BTC), has seen one of its biggest technical crises after hackers exploited a bug in the Elements Bitcoin Core fork used by Liquid nodes. The incident began on September 6 when approximately 4,000 BTC, then worth around $320 million, left the Liquid Federation wallet backing L-BTC.
The hackers created L-BTC without the necessary bitcoin backing it, and Sideswap's peg-out service processed the request normally. This allowed them to exchange the unbacked L-BTC for real BTC from Liquid's reserves.
Blockstream eventually responded to the actors' public messages and negotiated the return of the funds after the network was patched. The hackers returned 3,400 BTC, but retained around $47 million worth of 598.5 BTC, with no agreement on whether these funds will be returned.
The network remains paused, and Liquid has disabled bridge nodes and halted L-BTC deposits and withdrawals at centralized exchanges.