Liquid Network Pauses After $320M Bitcoin Exploit

Liquid Network, a Bitcoin sidechain used by cryptocurrency exchanges for faster settlements, has paused all operations following the withdrawal of approximately 4,000 Bitcoin, valued at $320 million, from its federation wallet. The incident, which occurred on Sunday, September 6, 2026, involved individuals claiming to be whitehat hackers. The withdrawn funds represent nearly all of the Bitcoin held in the Liquid Federation wallet, which backs the network's LBTC tokens. According to reports, the exploit stemmed from a software bug within Elements, the open-source technology that powers the Liquid Network, rather than a compromised private key or password. This flaw reportedly allowed for the creation of unbacked Bitcoin, which was then moved out of the network. The funds were transferred through SideSwap, an authorized trading platform on the Liquid Network. SideSwap stated that its Pegout Authorization Key was not compromised and that it processed the assets without being able to distinguish between legitimate funds and those created by the bug. Security specialists suggest the vulnerability lies at the node level of Liquid's transaction software.