Overview
- A large peg‑out moved roughly 3,996–4,000 BTC from Liquid’s federation wallet after a customer submission to SideSwap was processed on Sunday, Sept. 6.
- Blockstream and SideSwap say an Elements node validation bug created or allowed invalid L‑BTC to enter the peg‑out flow and that the withdrawal used a valid Peg‑Out Authorization Key rather than stolen federation keys.
- The federation’s reserves fell from about 4,200 BTC to roughly 197–207 BTC, bridge nodes were disabled, and exchanges were asked to suspend L‑BTC deposits and withdrawals while the investigation proceeds.
- The receiving address posted OP_RETURN and PGP‑signed messages claiming to be white‑hats and conditioned a return on confirmed patches; Blockstream says bridge nodes have been patched and has invited the prompt return of the funds but the BTC remain at the recipient address.
- Before services restart the federation must deploy fixes across functionaries, publish an independent technical postmortem that names the affected Elements versions, and reconcile outstanding L‑BTC against remaining BTC so users can safely redeem their holdings.