Liquid Network's LBTC is fully backed by bitcoin again, two months after a $320 million exploit drained its reserves

Summary

The Liquid Federation said its bitcoin reserves have been fully restored, reestablishing 1:1 BTC backing for every LBTC token on the Bitcoin sidechain, CoinDesk, Decrypt and The Block reported.

In the Sept. 6 exploit, about 4,000 BTC, then worth around $320 million, was taken from the federation wallet; the attacker returned about 3,400 BTC the next day but kept roughly 600 BTC, according to all three outlets.

The federation's announcement did not say who covered the shortfall, CoinDesk and Decrypt reported, but The Block said Liquid Federation board member Samson Mow named Blockstream as the source of the replacement bitcoin.

Blockstream CEO Adam Back said the network's defenses have been hardened and audited, and warned developers to treat AI-suggested fixes 'with suspicion,' per Decrypt; the federation said governance changes and more safeguards will be detailed in the coming weeks.

Key facts

• Mow reported a 50 BTC deposit into the federation wallet on Oct. 28, then 300 BTC and a further 250 BTC on Monday, bringing reserves back to full backing. (The Block)
• A bug in Liquid's software let the attacker mint about 4,000 LBTC with nothing behind them and redeem them for real bitcoin; the reserve fell from about 4,205 BTC to 197, citing Blockstream's incident report. (CoinDesk)
• Blockstream rejected the attacker's demand for a 10% bug bounty to return the remaining coins. (The Block)
• Back listed refreshed peg-out authorization keys held in cold hardware wallets, disabled proof validation caches with a node bug fix, and consensus rules hardened to 'fail closed' as the new lines of defense. (Decrypt)
• Users can swap BTC and LBTC 1:1 through providers like SideSwap, while direct federation withdrawals still run under 'enhanced operational controls.' (CoinDesk)
• Outlets differ on timing: Decrypt says the federation announced it Monday, The Block says Tuesday. (The Block)

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