Summary of this article
Around 4,000 Bitcoin worth $320 million were withdrawn from Liquid Network.
Liquid halted transactions and disabled bridge nodes following the security incident.
Exchanges paused LBTC withdrawals, while other network assets remained unaffected.
Crypto hacks have become a recurring threat to the digital asset industry, with attacks on exchanges, wallets and blockchain infrastructure sometimes resulting in millions of dollars in losses. In the latest incident, around USD 320 million worth of Bitcoin was withdrawn from the Liquid Network, a Bitcoin sidechain.
Liquid Network said purported white-hat hackers withdrew around 4,000 Bitcoin (BTC), worth approximately USD 320 million, from its Liquid Federation wallet. In a post on X, the network said the Blockstream team is working to contact the individuals on-chain through a signed message.
According to Liquid, the funds were withdrawn through the SideSwap PAK (Peg-out Authorisation Key). However, it said the key was not compromised, and neither were any of its other keys.
How Were 4,000 Bitcoin Withdrawn From Liquid Network
Galaxy Research said in a separate post on X that the 4,000 BTC taken from Liquid represented around 95 per cent of all Bitcoin that had been pegged onto the network. It added that Liquid had been halted since around 9am EST.
Galaxy Research also said the purported hackers consolidated the withdrawn funds into a holding address, which carried an on-chain message asking Liquid to contact them.
Following the incident, Liquid said cryptocurrency exchanges had been notified and had either paused or would pause deposits and withdrawals of Liquid Bitcoin (LBTC). Other assets on the network, including USDT, DePix and real-world assets (RWAs), were not affected, according to Liquid.
What Happens To Liquid Network After The Security Incident
The network has also temporarily disabled its bridge nodes, meaning no new transactions can be submitted. Liquid said the sidechain is effectively paused while federation members work to resolve the issue and restore normal network activity. Liquid also warned that wallets would be impacted during the disruption.
The incident highlights the risks faced by crypto infrastructure even when the underlying Bitcoin blockchain remains unaffected. Liquid said its PAK and other keys were not compromised, while the withdrawal of almost all Bitcoin pegged to the network has resulted in the suspension of activity on the sidechain.
Liquid said federation members are continuing to work on resolving the incident and restoring normal network activity. Liquid is a Bitcoin sidechain that allows users to move Bitcoin onto the network as Liquid Bitcoin, or LBTC. The latest incident affects the Liquid sidechain and its federation infrastructure, rather than Bitcoin’s underlying blockchain.
The incident comes amid wider security concerns in the crypto industry. In August, a separate Coldcard exploit resulted in more than 1,778 BTC being stolen, according to Galaxy Research.
