Liquid Network Recovers 3,400 BTC After Exploit

The Liquid Network has recovered 3,400 Bitcoin, approximately 85% of the funds withdrawn during a recent exploit, following a software patch and communication between the network's operators and the actors involved. The returned funds were transferred to the Liquid Federation wallet on Monday, September 7, 2026, confirmed by transactions in Bitcoin block 965,950. The incident, disclosed on September 6, involved the withdrawal of roughly 4,000 Bitcoin, valued at approximately $320 million at the time. The exploit did not stem from a compromise of private keys but rather from a vulnerability in Elements software, a Bitcoin Core fork used by Liquid. This flaw reportedly allowed for the creation of unbacked Liquid Bitcoin (LBTC), which were then used to withdraw real Bitcoin from the network's reserves through its standard pegout process. Communication between Blockstream, which operates Liquid's bridge nodes, and the actors occurred through messages embedded within Bitcoin transactions. The actors initially requested that Blockstream patch the vulnerability before they would return the funds.