A blockchain that powers faster Bitcoin transfers for multiple crypto exchanges was breached, with Liquid Network posting on X that roughly 4,000 of the 4,200 Bitcoin in one of its wallets were taken, worth about $320 million. The platform said the activity appears to involve "white-hat hackers," the sort who exploit holes and often give funds back, sometimes for a fee. Liquid wrote, "Liquid wallets will be impacted, and we're sorry for any inconvenience," adding, "Federation members are actively working on resolving this so we can restore normal network activity." New transactions are paused.
According to Liquid, the outflows moved via SideSwap, the network's permitted settlement venue for transfers, and it added that the key remained uncompromised. Emailed questions went unanswered by Liquid Network and Blockstream at the time.
Soon after Liquid Network disclosed the breach, Mempool data showed short notes embedded in tiny Bitcoin transfers that seemed to involve the attackers and Blockstream. Those notes stated the money would be sent back once the flaw had been remedied. As of Monday morning in London, no funds had yet been returned.
The incident lands amid a rough stretch for crypto security. Last week, a hacker pulled $6 million from a lending platform tied to Crypto.com. In August, a hack targeting the Coldcard offline Bitcoin wallet revived debates about storage safety.
"While these events may understandably shake consumer confidence, they highlight where critical infrastructure safeguards need to be strengthened, and why comprehensive security across the full stack is essential for operators," said Ziqing Ang, TRM Labs' head of policy for Asia-Pacific. Aneirin Flynn, the CEO of cybersecurity outfit FailSafe, said early indications suggest a flaw enabled the creation of L-BTC. The breach "is the latest in a spate of attacks exposing weaknesses in crypto infrastructure this year," Flynn said.
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"With roughly 95% of reserves drained and the network paused, the incident exposes a critical weakness in Liquid's validation and backing model."
Liquid runs as a sidechain - a distinct ledger that exchanges use to settle faster when the primary Bitcoin chain becomes clogged and fees rise. To accelerate throughput, the Liquid Network mints Liquid Bitcoin, or L-BTC, against real Bitcoin that it escrows. Blockstream launched the network in 2018; Adam Back, a cryptographer and prominent Bitcoin advocate, helped found the blockchain-focused firm. According to Blockstream, governance now sits with a federation comprising over 80 exchanges, infrastructure providers, and asset managers.
Blockstream lists BTSE and Bitfinex as users. Bitfinex and Tether operate under the same corporate owner, with Tether being the world's largest stablecoin issuer. BitMEX was also among the users, and has said it will wind down operations this month.
If you use services that route through Liquid, expect delays while the federation works to restore normal operations. The episode is a reminder that even specialized plumbing can spring leaks, and those ripples can reach everyday users. Watch whether funds are returned, how quickly transactions resume, and which platforms tighten their safeguards next.
