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Liquid Network pauses after purported white-hat hackers withdraw $320M in BTC

Liquid said the withdrawal took about 95% of its reported bitcoin reserves and led exchanges to suspend LBTC deposits and withdrawals.

Reported · Written up by our desk · Market Structure

The Bitcoin sidechain Liquid Network has paused activity after a purported “white-hat” operation allegedly withdrew about 4,000 BTC worth roughly $320 million from its federation wallet, prompting exchanges to suspend activity tied to its Bitcoin-backed token, LBTC, according to The Block.

Liquid said the incident drained roughly 95% of its reported bitcoin reserves, which were about 4,200 BTC before the withdrawal, and that the funds were taken via the SideSwap Peg-out Authorization Key, or PAK. The network said the key itself was not compromised and that other keys were not affected.

In an Sept. 6 post on X, Liquid said its technology provider, Blockstream, was working to contact the parties responsible through an onchain signed message, but Liquid did not identify the parties or confirm whether any funds would be returned.

Liquid said it temporarily disabled bridge nodes to prevent new transactions, effectively pausing the Liquid sidechain until the issue is resolved. It added that other assets issued on Liquid, including USDT, DePix, and real-world assets, were unaffected, though wallets could be impacted by the disruption.

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