- Blockstream is negotiating with Hackers to recover about 598.5 BTC still outstanding after the Liquid Network exploit.
- The attackers returned 3,400 BTC on Monday, leaving roughly 15% of the stolen funds unreturned.
- A software flaw in Liquid’s Elements software enabled the creation of unbacked L-BTC tokens that were swapped for reserve Bitcoin.
- Liquid Network is preparing an emergency update while talks continue, and no private keys were compromised.
Liquid Network revealed Tuesday that Blockstream is in ongoing discussions with the hackers who exploited the network for roughly $320 million to fully recover the stolen funds. “Discussions between Blockstream and the individuals responsible are ongoing to secure the return of the remaining funds,” Liquid said in an incident report on X.
The talks follow Sunday’s withdrawal of approximately 4,000 BTC after a software flaw allowed the creation of unbacked L-BTC tokens exchanged for reserve Bitcoin. The hackers returned 3,400 BTC on Monday, leaving about 600 BTC, valued at roughly $47 million, outstanding.
Liquid’s reserve fell from approximately 4,205 BTC to 197 BTC after that withdrawal and others processed before operations halted. Liquid confirmed that USDT and other tokens were unaffected, but users could not transact while the network was paused.
“The Liquid Federation functionaries were not hacked, and no private keys were compromised,” Liquid said, attempting to reassure users. Meanwhile, skepticism emerged about the attackers’ claim of being white-hat security researchers.
Ledger CTO Charles Guillemet wrote on X: “The ‘white hats’ still hold 600 BTC… If this was ever a negotiated reward under an encrypted contract signed on-chain, it looks more like extortion than white-hat Hacking!” Blockstream is preparing an emergency update while the fix undergoes review, according to Liquid devs.
Once the update is finalized, network operators will adjust to restore operations and reject the invalid withdrawal. “Our immediate priorities are recovering the remaining funds and resuming normal network operations safely and as quickly as possible,” Liquid said.
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