Whitehat Hacker Demands Patch Before Returning $320 Million in Stolen Bitcoin
A whitehat hacker has gained control of nearly $320 million in Bitcoin after exploiting a fatal network flaw on the Liquid Network. The incident occurred on September 6, when 4,000 L-BTC were submitted to SideSwap's peg-out service, which converts Bitcoin represented on Liquid back into BTC on the main network.
The withdrawal used SideSwap's valid Peg-out Authorization Key (PAK) and was processed by 11 of Liquid's 15 functionaries. However, it appears that a software bug in Elements, the underlying software for Liquid, created L-BTC without corresponding Bitcoin backing.
As a result, those tokens entered a valid peg-out process, prompting the federation to release real BTC. The actors controlling the Bitcoin have identified themselves as 'whitehats' and have stated their intention to return most of the funds once the bug has been fixed across the network.