Liquid Network

An actor exploited a software vulnerability in Elements, the software underlying Liquid, to create approximately 4,000 L-BTC without corresponding BTC backing. The unbacked L-BTC was transferred to SideSwap’s peg-out service, where it was indistinguishable from legitimately backed L-BTC.

SideSwap processed a valid peg-out and burned the L-BTC, causing the Liquid Federation to release approximately 3,996 BTC from its Bitcoin reserves. Liquid and SideSwap state that SideSwap’s Peg-out Authorization Key and the federation’s other keys were not compromised.