Liquid Network pauses after $320M BTC withdrawal

Liquid Network has paused new transaction activity after roughly 4,000 bitcoin, worth about $320 million at the time, was withdrawn from the federation wallet that supports its Bitcoin-pegged asset.

The Bitcoin sidechain said in an official update on September 6 that actors it described as purported white-hat hackers had removed around 4,000 of the approximately 4,200 BTC held in the wallet. Liquid said it disabled bridge nodes, notified exchanges to suspend L-BTC deposits and withdrawals, and was working with federation members to restore normal activity.

The actors have claimed they intend to return most of the funds after a vulnerability is patched, according to subsequent on-chain messages reported by Galaxy Research head Alex Thorn. That promise had not resulted in a publicly confirmed return as of September 7, and neither Liquid nor Blockstream had published a technical root-cause analysis.

The withdrawal used an authorized peg-out route

Liquid said the funds were withdrawn through the Peg-out Authorization Key, or PAK, associated with SideSwap, a federation member that provides settlement and peg-out services. It said the SideSwap key itself was not compromised, and that it had found no compromise of other keys.