The Liquid Federation says its bitcoin reserves are fully restored, nearly two months after an exploit involving approximately 4,000 BTC. Board member Samson Mow named Blockstream as the source of the replenishing funds, while CoinDesk reports the federation itself did not say where the coins came from.
The Liquid Federation announced Tuesday that the sidechain's bitcoin reserves are back to full 1:1 backing for all LBTC, nearly two months after approximately $320 million in bitcoin was withdrawn from the network.
According to the Liquid Federation on X, reserves are "fully restored, reestablishing 1:1 BTC backing for all LBTC", after a final 250 BTC transfer. Reserve balances are published at liquid.network, where node operators can verify the backing themselves.
Blockstream's deposits close the 600 BTC gap
Samson Mow, a Liquid Federation board member and former Blockstream executive, reported a 50 BTC deposit on Oct. 28, leaving 550 BTC outstanding. Another 300 BTC arrived on Monday, followed by a further 250 BTC later that day. Mow identified Blockstream as the source of the funds.
CoinDesk, however, reports that the federation did not say where the last 600 BTC came from.
How the September exploit unfolded
About 4,000 BTC was taken from Liquid's Federation wallet on Sept. 6. The attacker sent back roughly 3,400 BTC the next day after Blockstream patched the affected bridge nodes, but withheld about 600 BTC. Blockstream later rejected the attacker's demand for a 10% bug bounty in exchange for the remaining coins.
Liquid's incident report traced the exploit to a bug involving cached range proof verifications in Elements, the software that runs the network. The attacker created approximately 4,000 unbacked LBTC and used them to withdraw bitcoin through SideSwap, a Federation member with a peg-out authorization key. Liquid said its network operators were not hacked and no keys were compromised.
Withdrawal limits and governance changes remain
Users have been able to swap BTC and LBTC again for several weeks through participating providers. Direct Federation peg-outs were previously restricted pending additional security checks, and Tuesday's announcement did not say whether the remaining restrictions had been lifted.
The Federation said it is preparing changes to governance and oversight, along with additional technical and operational safeguards. It expects to share further details in the coming weeks.
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