Overview
- A customer peg-out processed through SideSwap led to roughly 3,996–4,019 BTC leaving Liquid’s federation reserve on Sunday in a single transaction that prompted operators to pause bridge nodes and halt L-BTC deposits and withdrawals.
- Blockstream and SideSwap attribute the event to a flaw in Elements node software that produced invalid L-BTC and not to a theft of federation signing keys or Peg-out Authorization Keys.
- After Blockstream patched bridge nodes, the self‑identified actors returned about 3,400 BTC on Monday while roughly 598–600 BTC remains in the withdrawal-linked address.
- The federation’s reserves fell from about 4,200 BTC to roughly 197 BTC, leaving L-BTC heavily under‑collateralized and preventing a safe restart of peg and bridge services until reconciliation and audits are complete.
- Industry voices questioned the ‘white‑hat’ label for the actors who kept part of the haul, and next steps include a public technical postmortem, reserve reconciliation, governance fixes, and possible legal or regulatory review that will determine when users regain normal access.