Liquid Network reports $320 million Bitcoin withdrawal in network breach

A Bitcoin-based payment and settlement sidechain called Liquid Network confirmed on Sunday that approximately $320 million in Bitcoin was unexpectedly withdrawn from its reserve wallet during a major security breach.

According to Reuters, the network stated in a post on X that self-described group named “white-hat hackers” removed roughly 4,000 of the 4,200 Bitcoins held in its Liquid Federation wallet, which is about 95% of the sidechain’s total backing reserves.

“Liquid wallets will be impacted, and we’re sorry for any inconvenience,” Liquid Network posted on social media, confirming that operators halted all new transactions across the network while investigating the incident.

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According to the network’s statements, the assets were withdrawn through SideSwap, a settlement platform authorized to handle redemptions from the network.

Liquid Network clarified that while SideSwap’s withdrawal mechanism was utilized, the authorization keys backing the process were not compromised.

Industry cybersecurity analysts and developers indicated the exploit stemmed from a vulnerability in Elements, the open-source software powering the sidechain, which allowed for the improper generation of tokens without proper key theft.