Liquid Network Suffers $320M Hack, 85% of Stolen Funds Returned

A major security incident occurred on September 6, 2026, when an attacker withdrew approximately 4,019.4 BTC (worth around $320 million) from Blockstream's Liquid Network, a Bitcoin-based settlement layer.

The attacker used SideSwap's Peg-out Authorization Key route to execute the withdrawal, but it was later revealed that the funds were not stolen due to compromised private keys or federation signatures being forged.

A software defect in the Elements codebase, which Liquid runs on, allowed the attacker to generate unbacked L-BTC, which the federation's peg-out machinery treated as legitimate and released real bitcoin against it.

The incident left behind a reconciliation problem and a $47 million hole. The attacker returned 3,400 BTC (about 85% of the withdrawn total) two days later, keeping 598.5 BTC for themselves.