Liquid Network restores 1:1 LBTC backing after $320M exploit

According to The Block, the Liquid Federation has announced that Liquid Network’s reserves are fully restored, reestablishing 1:1 backing for every LBTC roughly two months after an exploit drained its Federation wallet. The attacker initially took approximately 4,000 BTC$77,593.00▲0.66% — valued at around $320 million — on September 6.

Those transfers brought reserves back to full backing. The Liquid Federation announced the result on November 3.

The arithmetic matters to LBTC holders. The network now claims reserves cover the full LBTC supply one-to-one, but reaching that point required Blockstream to contribute funds beyond what the attacker returned.

The Liquid Federation thanked those who waited out the recovery: “We extend our sincere appreciation to the Bitcoin community, Liquid users, and ecosystem partners for their patience, understanding, and continued engagement throughout the recovery process.”

The technical failure traced to a bug in cached range proof verifications inside Elements, the software Liquid Network runs on. Elements v23.3.4 shipped September 9 to patch the vulnerability; block production resumed that day, and user transactions came back online September 10, per The Block’s account.

Blockstream was clear that covering the gap wasn’t meant to set a template. “We will not be a party to the precedent that open-source software developed for the good of the Bitcoin community should subject its developers to paying a ransom that far exceeds their economic participation,” the company wrote. It called the attacker’s withholding of assets “theft.”

That’s specific to this event; whether the same outcome would occur under different circumstances isn’t established here.

What isn’t established in available documentation: whether restrictions on direct Federation peg-outs have been lifted, and what governance changes, if any, followed the exploit. The concrete change on record is narrower — after September 6 and the November 2 deposits, Liquid says every LBTC is backed one for one.