Liquid Network Hacker Agrees to Return Most of Stolen 4,000 BTC

A large-scale bug in the Elements software led to the withdrawal of approximately 4,000 BTC from Liquid Network's federation wallet over the weekend.

The attacker, who communicated with Blockstream through Bitcoin OP_RETURN messages and PGP-encrypted text, initially claimed that they would not return the funds until a fix for the underlying vulnerability was implemented.

However, after Blockstream confirmed that all bridge nodes had been patched, the attacker agreed to transfer most of the BTC back to the federation address.

The affected transaction involved 4,000 L-BTC sent to SideSwap's peg-out service, which burned the tokens using a valid peg-out authorization key. The Liquid Federation then paid 3,996 BTC to the customer's Bitcoin address.