Liquid Network Restarts Blocks After $320M Bitcoin Exploit

The Liquid Network has resumed block production without processing transactions as part of a controlled recovery following a $320 million Bitcoin exploit. The network announced the cautious restart on September 10, 2026, stating that functionary nodes are now signing and validating blocks using updated software. However, all user transactions and peg operations remain suspended while the system is monitored for stabilization. The incident began on September 6 when approximately 4,000 BTC, valued at roughly $320 million, was withdrawn from the network's federation wallet. The withdrawal represented about 95% of the wallet's holdings. The actors behind the withdrawal identified themselves as whitehat hackers in on-chain messages, though this characterization has been questioned by some industry observers. The exploit involved a vulnerability in the proof-verification cache of Elements, the open-source software that underpins the Liquid sidechain. This flaw allowed valid proof results to be reused out of context, enabling the creation of unbacked LBTC tokens. These tokens were then processed through an authorized pegout service, prompting the federation to release real Bitcoin.