Liquid Network Announces Final Stages of Recovery Following Massive Hack

Bitcoin Magazine Liquid Network Announces Final Stages of Recovery Following Massive Hack The Liquid Network on Tuesday said that things were up and running again, over one month after hackers stole 4,000 bitcoin, worth about $320 million at the time, from the network’s federation wallet before returning most of it in a “white hat” operation. Writing in a blog post, the Liquid Network said that it was entering “the final stages of recovery with enhanced security.”  Hackers in September stole 4,000 bitcoins from the federation wallet that backs the Blockstream sidechain. Blockstream was able to negotiate to get back most of the funds.  LBTC:BTC swaps full service again. swap @liquid_btc to/from mainchain BTC on @side_swap. swap @liquid_btc to/from lightning on @AquaBitcoin. https://t.co/csslFIIRAE— Adam Back (@adam3us) October 20, 2026 “The final phase of restoration involves reestablishing the network’s full 1:1 bitcoin backing, followed by the controlled reactivation of Federation peg-outs for authorized PAK key holders,” the Liquid blog post read.  “The Federation, Blockstream, and independent security experts have made substantial progress toward this objective, with the necessary technical infrastructure and safeguards now in place.” The post added that it had introduced phased swaps again. Blockstream CEO Adam Back wrote on X on Tuesday that swaps were working again.  Liquid is a layer-2 created by Blockstream that allows users to quickly move assets backed 1:1 with bitcoin. People can swap stablecoins for bitcoin and bitcoin on the Lightning Network on apps that support the Liquid Network.  Hackers were able to get 4,000 bitcoins by exploiting an inflation bug on the Liquid sidechain to create over 4,000 LBTC — a token supposedly backed by bitcoin — that did not exist before and cash them out for real on-chain BTC.  The hackers claimed to be white hat hackers who then had an exchange with Blockstream via messages written into Bitcoin blocks. Though critics argue they were not so ‘white’ since they kept 15% of the stolen funds, worth millions. In one message, the hackers slammed Blockstream as “delusional, greedy, and arrogant,” and threatened to reveal all of Blockstream’s encrypted messages in the exchange unless the company paid the hackers 10% of the bitcoins as an official bounty.  “You SHALL pay 10% using your own money as bug bounty or you will cause all your holders a 15% loss for your irresponsibility and stinginess,” the message read.  The hackers are still holding onto around 600 bitcoins — or 15% of the total funds — worth close to $50 million at today’s prices as per the latest public knowledge.  It is not clear if Blockstream reached a settlement with the hackers in private. This post Liquid Network Announces Final Stages of Recovery Following Massive Hack first appeared on Bitcoin Magazine and is written by Mathew Di Salvo.