Bitcoin Layer 2 solution Liquid Network recovered 3,400 BTC of the approximately 4,000 BTC withdrawn during Sunday’s security incident, according to the latest update from Samson Mow.
The alleged white hat hackers previously told the Adam Back-led company that the funds would be returned once the network problem was resolved. In their post, they warned that the chain remained at risk and urged Blockstream to patch each node before safely transferring the Bitcoin back.
Network still paused
The funds were returned after Blockstream confirmed that the affected bridge nodes had been fixed. Approximately 598 BTC remains outstanding and Blockstream continues to engage with parties claiming to be hackers.
This development follows Liquid’s revelation that around $320 million worth of BTC had been withdrawn from its Federation wallet. The funds were moved using the SideSwap PAK, while the Peg-out authorization key itself was not compromised. Exchanges then suspended or prepared to suspend LBTC deposits and withdrawals, while Liquid deactivated its bridge nodes and effectively shut down the sidechain.
The network remains on pause while Blockstream and Federation members perform further security fixes and improvements, work to resolve a chain split, and prepare for a safe restart. Liquid wallets and services remain affected. Mow too said Users should not send Bitcoin to Liquid login addresses until the network confirms its restart.
“Following the recent incident affecting the Liquid network and the movement of funds, Blockstream, as Liquid’s technical provider, and the Liquid Federation have worked diligently to resolve the current situation and ensure the return of assets. Updated software has been deployed as Federation members prepare the network for a coordinated restart. Our teams remain focused on strengthening the network.”
Community reactions
Ledger CTO Charles Guillemet interviewed whether the remaining BTC could be part of a negotiated reward agreed via an on-chain signed crypto contract. If so, the executive argued that the situation would resemble extortion more than traditional hacking.
Meanwhile, Isabel Foxen Duke, host of the Bitcoin Rails podcast, also criticized the actions of the white hat hackers. In one post, she described the situation as “incredibly illegal/unethical” and added that they could still face serious consequences if identified and arrested.
Another market commentator describe Liquid Incident as “Most Embarrassing Moment in Modern Bitcoin History.”
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