Liquid Network redemptions remain frozen after Bitcoin exploit

Redemptions of Liquid Bitcoin (L-BTC) to on-chain Bitcoin remain suspended 35 days after a major exploit of the Liquid Network. The incident, which began on September 6, 2026, involved a vulnerability in the Elements software that allowed an attacker to drain nearly 4,000 BTC from the federation reserve.

While approximately 3,400 BTC were returned by actors identifying as white-hat hackers, a deficit of roughly 600 BTC remains. The attackers have reportedly refused to release the remaining funds, which are valued at approximately $49.69 million, unless Blockstream pays a 10% reward. Blockstream has rejected this demand.

As a result, the network’s reserves currently cover only about 86% of the L-BTC in circulation. While internal transactions and block production resumed on September 10, the peg-out function—allowing users to convert L-BTC back to Bitcoin—is frozen until the 1:1 reserve is fully restored, software upgrades are implemented, and an independent security audit of Elements v23.3 is completed.