Blockstream Rules Out Ransom Payment After Liquid Network Bitcoin Theft

Blockstream said it will not pay a ransom tied to bitcoin taken from Liquid Network, its federated Bitcoin sidechain, according to a statement posted on X on September 11. The company attributed the incident to a September exploit in which parties describing themselves as "whitehat" hackers withdrew about 4,000 BTC (roughly $320 million) from the federation's reserves by abusing a weakness in transaction-validation software. Most of the funds have been returned, Blockstream said, but around 600 BTC (about $47 million) remains under the attackers' control. Blockstream characterized the episode as theft, rejecting the idea that it constituted responsible disclosure. "Taking assets without authorization and withholding their return is a crime, not responsible disclosure. It is not whitehat activity," the company said. Liquid Network was paused following the withdrawal. Blockstream said that if the remaining bitcoin is not returned, it will pursue "every lawful avenue" and work with law enforcement, exchanges, service providers and forensic specialists to trace and recover the assets. Chainalysis said the attackers exploited how Liquid cached transaction-verification checks, enabling them to mint unbacked LBTC and swap it for real bitcoin. After Blockstream confirmed its bridge nodes had been patched, the actors returned 3,400 BTC—about 85% of the amount withdrawn—in a single transaction. The balance, sent as change to an actor-controlled address, has not been returned. Chainalysis noted that some observers have speculated the withheld funds could function as a de facto bounty, though neither side has confirmed any such arrangement. Blockstream said there is still an opportunity to resolve the matter responsibly, while warning that Bitcoin's transparency means the transaction trail and supporting evidence "do not disappear." The company also pointed to the broader community of engineers, cryptographers and whitehat hackers that can assist in tracing funds, as scrutiny intensifies on the federated custody model underpinning Liquid. Whether the outstanding bitcoin will be returned remains uncertain as the standoff continues.