7th September 2026 – (Victoria) A bitcoin‑linked sidechain used by multiple crypto platforms has suffered a US$320 million breach, intensifying concerns over digital‑asset security. Liquid Network, a federation that runs a faster‑settlement layer on bitcoin, said roughly 4,000 of the approximately 4,200 Bitcoin held in a Liquid Federation wallet were withdrawn, describing the actors as purported white‑hat hackers who relocate funds after identifying vulnerabilities with the intention of returning them for a fee. The organisation apologised for the disruption, stated that Liquid wallets have been affected and paused all new transactions while members work to restore normal operations.
The incident follows a spate of hacks in recent weeks that has pushed crypto cybersecurity back into the spotlight. An attack last week drained around US$6 million from a lending platform linked to Crypto.com, while an August exploit targeting popular offline wallet Coldcard revived debate over the safest ways to store bitcoin. Liquid Network, launched in 2018 by Blockstream and now operated by a federation of exchanges, infrastructure providers and asset managers, is designed to speed settlement by issuing Liquid Bitcoin (L‑BTC) against Bitcoin that is locked on the main chain. Official materials list exchanges such as BTSE and Bitfinex, which shares a parent, iFinex, with stablecoin issuer Tether, among users of the network, and industry records show other trading venues have also integrated Liquid.
In an update on X, Liquid Network said the withdrawals were processed via SideSwap, a sanctioned settlement platform for Liquid transfers, adding that the key had not been compromised. SideSwap is publicly presented as infrastructure for swaps and settlement on Liquid, with open‑source tooling available to manage assets and perform atomic swaps. Blockstream’s documentation describes Liquid as a sidechain secured by functionaries that facilitate one‑minute blocks and confidential transactions.
Aneirin Flynn, chief executive of cybersecurity firm FailSafe, said early indicators suggest a flaw that enabled the minting of L‑BTC, arguing that the episode exposes weaknesses in crypto infrastructure this year. He added that with roughly 95 per cent of reserves drained and the network paused, the breach highlights a critical gap in Liquid’s validation and backing design. Public profiles and corporate records list Flynn as FailSafe’s CEO.