Alleged white hat hackers have recovered 3,400 bitcoins (worth an estimated $262.6 million) of the 4,000 bitcoins (~$320 million) stolen from Liquid Network’s Bitcoin sidechain over the weekend.
The sidechain developed by Blockstream 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 RWA are not affected by this security incident,” Liquid said.
The funds were siphoned from Liquid’s federation wallet, which contained approximately 4,200 bitcoins prior to the attack. However, it is not clear how the funds were stolen.
“What we know so far is that the funds were withdrawn via a SideSwap PAK (Peg-out Authorization Key), but that key was not compromised, nor were any others,” Liquid said.
“Liquid wallets will be affected and we apologize for any inconvenience. Federation members are actively working to resolve this so we can restore normal network activity,” he added.
The incident was claimed by alleged “white hat” hackers who said they would return most of the stolen funds as soon as Liquid resolved the vulnerability that led to the heist.
“Please fix the bug first. The chain is at risk at the latest commit right now. Make sure every node is patched. Then we will transfer the money back safely after we confirm the fix,” a blockchain message from the hackers reads.
On Monday, 3,400 Bitcoins were returned to Liquid, but approximately 598 Bitcoins (~$47 million) remain unpaid as Blockstream continues to communicate with the hackers, former Blockstream CEO Samson Moe said.
“The network remains on pause while Blockstream and Federation members make further 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,” Moe said.
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