Liquid Network pauses after purported ‘white-hat’ hackers withdraw $320 million in bitcoin
The Bitcoin sidechain has been paused, with exchanges suspending LBTC deposits and withdrawals as Blockstream works to contact those responsible.
Blockstream's Liquid Network, a Bitcoin sidechain designed for fast and confidential transactions, has been temporarily suspended following the unauthorized withdrawal of approximately $320 million in bitcoin. The incident, which surfaced on September 6, 2026, involved parties describing themselves as "white-hat" hackers — individuals who exploit vulnerabilities to expose security flaws rather than profit maliciously. Blockstream confirmed it has paused the network and is actively working to identify and contact those responsible for the withdrawals.
The Liquid Network functions as a federated sidechain pegged to Bitcoin, primarily used by exchanges and financial institutions to move large amounts of BTC quickly and with greater privacy. It operates through a federation of trusted functionaries who collectively manage the network's multisignature wallet. In response to the incident, multiple exchanges have suspended deposits and withdrawals of Liquid Bitcoin (LBTC) while the situation is assessed and the security of user funds is evaluated.
The event raises significant concerns about the security architecture of federated sidechain models and could prompt renewed scrutiny of custodial Bitcoin infrastructure more broadly. A loss — or even a temporary displacement — of $320 million in bitcoin represents a material stress test for institutional confidence in layer-2 Bitcoin solutions.
Observers will be watching closely for Blockstream's official post-mortem, any on-chain movements of the withdrawn funds, and whether the self-described white-hat actors return the assets in full.
Source: The Block
