ALLEGED ‘white-hat’ hackers have returned 3,400 Bitcoin (worth approximately $262.6 million) of the 4,000 Bitcoin stolen from the Liquid Network, a Bitcoin sidechain developed by Blockstream. The incident came to light after Liquid disclosed it had disabled its nodes and paused all transactions in response to the weekend heist. The federation wallet, which held around 4,200 Bitcoin before the attack, was the target, though Liquid said it was unclear exactly how the funds were stolen.
Authorities noted that the withdrawal allegedly occurred via the SideSwap PAK (Peg-out Authorization Key), which Liquid stated was not compromised, nor were other keys. Liquid warned that wallets would be affected and said federation members were working to restore normal network activity, with exchanges notified and some deposits and withdrawals paused or to be paused.
The claim of responsibility came with a demand to fix the underlying bug before any funds would be transferred back. A blockchain message from the hackers reportedly urged a patch across all nodes and a secure restart before returning the money. By Monday, 3,400 Bitcoin had been returned, leaving about 598 Bitcoin (roughly $47 million) outstanding as Blockstream continues discussions with the hackers.
The network remains paused while Blockstream and federation members implement additional security fixes, resolve the chain split, and prepare for a safe restart; Liquid wallets and services are expected to remain affected during this period.