Alleged ‘white-hat’ hackers have returned 3,400 Bitcoin (worth approximately $262.6 million) of the 4,000 Bitcoin (~$320 million) stolen from the Bitcoin sidechain Liquid Network over the weekend.
The Blockstream-developed sidechain disclosed the incident on Sunday, after disabling its nodes and suspending all transactions in response to the heist.
“Exchanges have been notified and have already paused (or will pause) LBTC deposits and withdrawals. Other Liquid assets such as USDT, DePix, and RWAs are unaffected by this security incident,” Liquid said.
The funds were drained from Liquid’s federation wallet, which held approximately 4,200 Bitcoin before the attack. However, it is unclear how the funds were stolen.
“What we know so far is that the funds were withdrawn via the SideSwap PAK (Peg-out Authorization Key), but that key was not compromised, nor were any others,” Liquid said.
“Liquid wallets will be impacted, and we’re sorry for any inconvenience. Federation members are actively working on resolving this so we can restore normal network activity,” it added.
The incident was claimed by alleged ‘white-hat’ hackers who said they would return most of the stolen funds as soon as Liquid resolves the vulnerability that led to the heist.
“Please fix the bug first. The chain is under risk at latest commit right now. Make sure every node is patched. Then we will transfer the money back safely after confirming the fix,” a blockchain message from the hackers reads.
On Monday, 3,400 Bitcoin was returned to Liquid, but approximately 598 Bitcoin (~$47 million) remains outstanding as Blockstream continues to communicate with the hackers, former Blockstream executive Samson Mow said.
“The network remains paused while Blockstream and Federation members make additional fixes and security improvements, resolve the chain split, and prepare for a safe restart. Liquid wallets and services will continue to be affected during this time,” Mow said.
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