Liquid Network Bridge Exploit: $269M Returned, $47M Still Missing

Liquid Network has recovered 3,400 BTC (about $269.2 million) after unknown actors exploited a flaw in its bridge infrastructure to withdraw 4,000 BTC through SideSwap's peg-out service, which allows users to move funds from the Liquid sidechain back to the Bitcoin network. The actors, who described themselves as 'white-hat' hackers, initially withdrew around 95% of the Bitcoin held in Liquid's federation wallet before agreeing to return funds once the underlying vulnerability was patched.

Communication between Blockstream and the attackers took place entirely through messages attached to Bitcoin transactions. The attackers told Blockstream to 'fix the bug first' and confirm every node was patched before they would return the funds. Blockstream later confirmed its bridge nodes were patched and told the group the funds were safe to return.

While 3,400 BTC has now been sent back to the Liquid Federation wallet, roughly 598.5 BTC (about $47 million) remains in the attackers' address. No public agreement has been disclosed granting the actors permission to withdraw funds or retain a bounty, and it is unclear whether the remaining Bitcoin will be returned.