Liquid Sidechain Frozen After ‘White Hat’ Drains Bitcoin Reserve

An Elements software bug let someone mint unbacked L-BTC and peg out roughly 4,000 BTC, and the party holding it says they want the bug patched before it sends most of it back.

Liquid Sidechain Frozen After ‘White Hat’ Drains Bitcoin Reserve

Posted September 7, 2026 at 6:19 am EST.

Roughly 4,000 bitcoin, worth about $320 million, left the wallet that backs Liquid’s L-BTC token on Sunday, and the Bitcoin sidechain has been paused since. The withdrawal took about 95% of the bitcoin pegged into the network, which held roughly 4,200 BTC beforehand. Liquid said the parties responsible describe themselves as white-hat hackers.

Liquid settlement platform SideSwap, which processed the 4,000 BTC withdrawal, said the transaction was initiated at 14:05 UTC, the corresponding L-BTC tokens were burned on Liquid against a valid peg-out authorization, and the Liquid Federation paid 3,996 BTC to a Bitcoin address 23 minutes later. Liquid said SideSwap’s Peg-out Authorization Key was not compromised, nor was any other key. SideSwap said the L-BTC in that order had been created through a bug in Elements, the open-source software Liquid runs on, and that its service had no way to tell those coins from any other L-BTC.