Liquid Network Says 3,400 BTC Returned After Elements Software Flaw Enabled Unbacked LBTC Mint
AI Market Summary
Liquid Network disclosed an Elements software exploit that enabled minting of unbacked LBTC and conversion into roughly 4,000 BTC via SideSwap's Pegout, temporarily collapsing Liquid's BTC reserves. While 3,400 BTC has reportedly been returned and no federation keys were compromised, the network remains suspended pending an emergency Elements release and security review. The incident elevates near-term operational and counterparty risk around Liquid-related flows.
Impact level
● Medium
Affected assets
BTC/USDT+0.98%
AI Insight · BTC/USDTAI Insight
▼ Bearish
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Liquid Network has published an incident report saying an exploit targeting a vulnerability in its open-source Elements software was carried out on Sept. 6, according to Huoxing Finance. The attackers allegedly minted about 4,000 LBTC without corresponding BTC reserves and then used SideSwap's Pegout mechanism to swap the tokens for roughly 4,000 BTC.
After the exploit, Liquid said its BTC reserves fell to about 197 BTC from roughly 4,205 BTC. The network added that the incident did not involve compromised private keys or a breach of federation nodes.
Liquid reported that 3,400 BTC has been returned so far, leaving approximately 598.5 BTC outstanding. Blockstream said it has completed a patch for the vulnerability, and the Liquid network remains suspended while an emergency release, Elements v23.3.4, is prepared. The update is expected to be deployed after security reviews are completed and network integrity is restored.
