Liquid Network Halted After $320 Million BTC Withdrawal

A significant incident has occurred on the Liquid Network, a Bitcoin sidechain developed by Blockstream. On September 6, nearly 4,000 BTC worth approximately $320 million was withdrawn from its federation reserves by unidentified actors claiming to be white-hat hackers.

The withdrawal drained around 95% of the bitcoin held in reserve by the Liquid Network, leaving only about 200 BTC remaining. The funds were moved via a peg-out authorization key (PAK) associated with SideSwap, although Blockstream stated there is no evidence that the key itself was compromised.

An on-chain message attached to the transaction read: 'we are whitehats. contact us on chain.' However, Blockstream has since attempted to reach the party responsible using a signed on-chain message, but as of the latest update, neither their identity nor any commitment to return the funds has been confirmed.

Liquid stated in a post on X that the coins were withdrawn by 'purported white-hat hackers' and that the network's bridge nodes had been temporarily deactivated to prevent new transactions from being submitted. The Liquid sidechain is effectively paused until the issue is resolved.