The Bitcoin-based Liquid Network suspended new transactions after roughly 4,000 bitcoin, valued at about $320 million, were withdrawn from its federation wallet on 6 September. The network described those responsible as “purported white-hat hackers,” but the ownership and recovery status of the funds remained uncertain.

What was moved

Liquid said most of the approximately 4,200 bitcoin held in the affected wallet had been transferred. The withdrawals passed through SideSwap, a settlement platform authorised to facilitate transactions. The network said the cryptographic key used in the process had not been compromised, raising questions about governance controls and transaction authorisation.

Liquid is a Bitcoin sidechain designed to support faster settlement and the issuance of digital assets. It relies on a federation of participating institutions rather than Bitcoin’s full proof-of-work network for some operational functions.

Users face disruption

The transaction halt means wallet activity and settlement services may be delayed while operators review the incident. Users were advised not to rely on unverified recovery claims or interact with accounts impersonating support staff. Large security incidents commonly trigger phishing attempts.

Questions for investigators

Key issues include how the withdrawals were authorised, whether the actors can prove benign intent, where the bitcoin is held and what safeguards will govern any return. Independent blockchain analysis may clarify fund movements, but it cannot alone establish legal ownership or intent. A transparent post-incident report will be important for confidence in federated custody systems.

References

• Reuters
• The Block

Featured image: Photo by André François McKenzie/Unsplash.