A Bitcoin Network Lost $320 Million In A Hack. The Attackers Say They’re The Good Guys

Hackers withdrew roughly 4,000 Bitcoin worth about $320 million from Liquid Network, draining about 95% of the Bitcoin held in the network's federation wallet and forcing the Bitcoin-linked settlement system to halt new transactions.

Liquid said the Bitcoin was taken from a wallet that held about 4,200 BTC and described those responsible as "purported white-hat hackers," a term commonly used for security researchers who identify vulnerabilities rather than exploit them for conventional theft. The network said users' Liquid wallets would be affected while federation members worked to address the breach, Bloomberg reported.

The incident occurred through SideSwap, a platform authorized to process withdrawals from Liquid, rather than through the theft of the cryptographic key used to authorize those transactions. Liquid said the SideSwap Peg-out Authorization Key was not compromised, Reuters reported Monday.

More details about the mechanism behind the withdrawal emerged after the initial disclosure. SideSwap said a customer sent 4,000 L-BTC to its peg-out service on Sunday. The tokens were burned through what appeared to be a valid authorization, after which the Liquid Federation paid 3,996 BTC to the customer's Bitcoin address.