Whitehats Hold Liquid BTC Pending Elements Patch and Reserve Fix
Whitehats control nearly 4,000 BTC drained from the Liquid federation after a bug-created L-BTC peg-out; they require a network-wide Elements fix and reserve reconciliation before returning most funds.
On September 6, a submission of 4,000 L-BTC to SideSwap produced a valid authorization and released approximately 3,996 BTC from the Liquid federation reserve. The coins moved to an address now holding roughly 3,998.5 BTC.
No signing keys were stolen. A flaw in Elements, the software that powers Liquid, created unbacked L-BTC that nevertheless passed federation authorization. Eleven of the fifteen functionaries signed the transaction.
Conditions for return
The actors controlling the coins identified themselves as whitehats through OP_RETURN messages on Bitcoin. They stated they will return most of the funds only after the Elements bug is patched network-wide and every node is updated, and after the federation restores one-for-one reserve backing.
Liquid has disabled its bridge nodes. SideSwap has suspended all swaps, peg-ins, and peg-outs. The exact technical root cause and the required patch remain unpublished, and no timeline for reconciliation has been stated.