Overview
- A coordinated peg-out moved roughly 3,996–4,200 BTC from Liquid’s federation reserves to the Bitcoin mainchain on September 6, with the transaction carrying an OP_RETURN message identifying the actors as “whitehats.”
- Blockstream’s proof-of-reserves shows the treasury fell from about 4,200 BTC to roughly 207 BTC after the withdrawal, representing roughly 95% of reserves and prompting bridge nodes to be disabled.
- Liquid says the peg-out passed through SideSwap’s Peg‑out Authorization Key while asserting SideSwap’s key and other authorization keys were not stolen, raising questions about how valid signatures still produced a large payout.
- Preliminary on-chain analysis and industry sources point to an Elements/L‑BTC validation or inflation bug that could have let incorrectly issued L‑BTC enter the peg-out flow and be redeemed for mainnet BTC.
- No confirmed return of funds has been reported; exchanges paused L‑BTC flows and federation members say they need a public postmortem, software patches, a reconciliation of outstanding L‑BTC, and proof of recovery before normal operations resume.