CoinTelegraph
Liquid Network said roughly 4,000 BTC (~$320M at current prices) was pulled from its Federation wallet by what the sidechain's operators described as 'purported white-hat hackers.' The Bitcoin sidechain, used by major venues including Bitfinex and OKEx for L-BTC settlement, has paused block production until the issue is resolved.
Why it matters
Liquid is one of the largest production Bitcoin sidechains, anchoring L-BTC at a 1:1 BTC peg backed by Federation custody. Roughly 4,000 BTC leaving that custody in a single transaction is a structural event for any counterparty relying on the peg, even before the cause is clear.
The 'purported white-hat' framing is doing heavy lifting in the announcement. Legitimate white-hat interventions typically require public attribution and on-chain traces proving funds were relocated to a recoverable address; neither has surfaced yet.
Market impact
No spot BTC is hitting exchanges from this event, so there is no immediate sell pressure. The contagion vector is the L-BTC peg: if the Federation cannot recover or replace the BTC, exchanges and custodians holding L-BTC for users face a redemption shortfall that reprices the sidechain's credit risk.
Frequently asked questions
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What happened to Liquid Network's Federation wallet?
Roughly 4,000 BTC (~$320M) was pulled from the Federation wallet, which Liquid's operators said was done by 'purported white-hat hackers.' The Bitcoin sidechain has paused block production until the issue is resolved.
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Why was Liquid Network paused?
Liquid paused block production to prevent further unauthorized movement of BTC from the Federation wallet while the operators investigate the ~4,000 BTC withdrawal and assess whether the funds can be recovered.
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What is the L-BTC peg and is it at risk?
L-BTC is a 1:1 BTC-backed token issued on Liquid, with each unit supposed to be redeemable for one BTC held in Federation custody. If the 4,000 BTC cannot be recovered, the L-BTC peg could face a redemption shortfall for exchanges and custodians.
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Who are the 'purported white-hat hackers'?
Liquid has not yet publicly identified who claimed the withdrawal was a defensive white-hat intervention. Legitimate white-hat operations typically publish on-chain traces and a recovery address, neither of which has been confirmed in this case.
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Does this affect Bitcoin's spot price?
The drain was off-exchange custody held by the Liquid Federation, not spot selling into the market, so there is no direct sell pressure on BTC. The risk is concentrated in the L-BTC peg and in venues that hold L-BTC on behalf of users.
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