Liquid Network Hacked for $320M, 85% of Stolen Funds Returned

A critical software vulnerability in Liquid Network allowed hackers to steal nearly $320 million worth of BTC before returning 85% of the funds.

The exploit, which occurred on September 6, targeted a flaw in the Bitcoin sidechain's transaction validation mechanisms.

The attackers used Liquid's Confidential Transactions system, which uses cryptographic proofs to validate transfers while keeping amounts hidden, to create unbacked L-BTC tokens and swap them for actual BTC from Liquid's reserve.

About 3,998 BTC, 95% of Liquid's federation wallet, was drained before the network was paused.