Industry News

Liquid Network Recovers Most of $268M Stolen in Bitcoin Exploit

Crypto Briefing · 7 Sept 2026

Key Takeaway Businesses relying on blockchain platforms or sidechains should ensure third-party software components are promptly patched, as vulnerabilities in underlying code can be exploited even without credential theft.

Liquid Network, a Bitcoin sidechain platform, has recovered the bulk of funds lost in a weekend exploit after the attacker returned 3,400 BTC (about $268 million) to the Liquid Federation wallet. The hacker, who described themselves as a white-hat, kept roughly 600 BTC, around 15% of the total, though no public agreement confirms whether this was an agreed bounty.

The attacker had pledged to return most of the funds once Blockstream fixed the underlying flaw, and only sent the Bitcoin back after Blockstream confirmed its bridge nodes were patched. The issue did not involve stolen private keys; instead, a bug in Elements, the Bitcoin Core fork underpinning Liquid, allowed creation of unbacked L-BTC tokens due to a range-proof verification cache flaw. These fake tokens were then swapped for real Bitcoin through Liquid's normal peg-out process.

Liquid has not yet resumed L-BTC deposits and withdrawals as operators work toward a safe restart, though other Liquid-issued assets and the main Bitcoin network remain unaffected.

Summarised by CISO AI from Crypto Briefing. We link back to every original so you can read it yourself.