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Liquid attacker returns most BTC after in-transaction negotiation

About 3,400 BTC, or roughly 85% of the 3,998.5 BTC withdrawn from the Liquid federation wallet, was sent back while the return remained unconfirmed Monday.

Reported · Written up by our desk · Market Structure

The attacker behind a Sunday drain of Blockstream’s Liquid federation wallet has broadcast a transaction returning the majority of the bitcoin obtained. According to The Defiant, the outgoing address sent 3,400 BTC, worth about $268 million, to the federation wallet address, and 598.49955894 BTC, about $47.2 million, to the attacker’s own address.

The return transaction was still unconfirmed as of 15:50 UTC Monday and was flagged as replaceable with a different transaction under replace-by-fee rules. The Defiant also said the transaction carries a fee of 1,768 satoshis, for a rate of 0.77 satoshis per virtual byte, and uses 16 inputs that are replace-by-fee flagged.

The messaging between Blockstream and the attacker took place through on-chain encrypted and PGP-signed communications. The Defiant reported that Blockstream sent a “Yes, thank you” message at 03:30 UTC, followed by a later signed note stating that bridge nodes were patched and it was safe to return funds at 11:46 UTC, shortly before the 3,400 BTC transfer.

Blockstream had not published further publicly after its initial statement on Sunday, and nothing on-chain specified how much the attacker keeps or whether the funds constitute a bounty, The Defiant added. SideSwap, a Liquid Federation member whose peg-out authorization key was used, said the peg-out service processed the order as usual, the L-BTC was burned on Liquid, and the Liquid Federation paid 3,996 BTC at 14:28 UTC after SideSwap later said the L-BTC was created through a bug in Elements software.

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