Liquid Network Hacked for $320 Million

The Liquid Network suffered a massive hack on Sunday, with hackers withdrawing approximately $320 million in Bitcoin from its federation wallet. The stolen funds were backed by L-BTC, a cryptocurrency issued by the network.

Bridge nodes on the Liquid Network have been paused to prevent further access, and exchanges have been instructed to halt L-BTC deposits and withdrawals. The hack has left users holding LBTC with their savings at risk, as the underlying BTC is currently not redeemable.

The hackers exploited an inflation bug on the LBTC sidechain to create over 4,000 new tokens that did not exist before, which they then cashed out for on-chain Bitcoin. The transaction was signed by the federation members' HSM security servers due to the consensus bug.