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Liquid attacker returns 3,400 BTC after bridge nodes patched

The withdrawal of roughly 4,000 BTC from Liquid's federation wallet was tied to LBTC pegged out through a SideSwap authorization key that was not compromised, according to the network.

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The Liquid Network attacker who withdrew roughly 4,000 BTC from a Liquid Federation wallet has returned 3,400 BTC after Blockstream said bridge nodes had been patched, leaving about 598.5 BTC behind, The Block reported. Blockstream said the Liquid Federation paused network activity while it urged exchanges to suspend LBTC deposits and withdrawals. The Block reported that the attacker communicated with Blockstream via Bitcoin OP_RETURN messages and PGP-encrypted text, including a message at block 965,875 asking for the bug to be fixed and every node patched before funds were returned. The outlet said Blockstream, led by Adam Back, then sent a PGP-signed onchain message confirming the bridge nodes were patched and safe to return the funds. The attacker returned the 3,400 BTC to the federation address at block 965,950 after earlier contact began when Liquid said on Sept. 6 that about 4,000 BTC, worth around $320 million, had been withdrawn. The Block reported that the LBTC involved was created through a bug in the Elements software, according to SideSwap, and that the SideSwap pegging out process burned tokens using a valid peg-out authorization before the Liquid Federation paid 3,996 BTC to a customer Bitcoin address. The network said the peg-out authorization key itself was not compromised, and SideSwap said the affected transaction involved 4,000 LBTC sent to its peg-out service.

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