Liquid Discloses 4,000 BTC Exploit Incident, Reserve Drops to 197 BTC

Odaily Planet Daily reports, according to Bitcoin News monitoring, the Liquid Federation released an incident report stating that the attacker exploited a validation cache vulnerability in Elements’ range proofs to mint approximately 4,000 unbacked L-BTC, which were then exchanged for real BTC via SideSwap’s authorized exit anchor pathway. Liquid’s governing entities treated these transactions as valid and released approximately 4,000 BTC from the federation’s reserves. Prior to the incident, Liquid held about 4,205 BTC; before suspending operations, reserve levels dropped to a minimum of 197 BTC. The attacker, identifying as a white hat, has since returned 3,400 BTC, leaving approximately 598.5 BTC still unreturned. No private keys were compromised, and the exit anchor mechanism functioned as designed. Liquid remains offline, and Blockstream is preparing to release an emergency version of Elements v23.3.4 and is working to restore the network under a 1:1 BTC reserve backing.