Liquid Attackers Return 3,400 BTC and Keep Nearly 600 as Blockstream Prepares a Restart

Most of the bitcoin is back in the federation wallet, but $47 million is not, and the sidechain is still frozen.

Liquid's "white hats" keep $47 million

Original Image Credits: Inactive design / Shutterstock.com

Posted September 8, 2026 at 5:46 am EST.

The parties who withdrew roughly 4,000 BTC from Liquid Network’s federation wallet returned 3,400 BTC, worth about $270 million, on Monday, restoring about 85% of what left the Bitcoin sidechain. They have retained 598.5 BTC, worth roughly $47 million.

The incident, which led to the freezing of the sidechain on Sunday, saw 4,000 L-BTC sent to the peg-out service run by settlement platform SideSwap at 14:05 UTC. The tokens were burned against a valid peg-out authorization and the Liquid Federation paid out roughly 4,000 BTC to a Bitcoin address 23 minutes later. SideSwap said the L-BTC in that order had been created by a bug in Elements, the open-source software Liquid runs on, and that neither its systems nor its Peg-out Authorization Key were compromised. The federation wallet held roughly 4,200 BTC beforehand, so the withdrawal took about 95% of all bitcoin pegged into the network.

In short, the federation paid out real bitcoin against L-BTC that should never have existed.