Liquid Network has restored full bitcoin backing for all LBTC tokens after the $320 million exploit that drained most of its reserves on September 6, 2026. According to the primary report, the Liquid Federation confirmed the recovery on Monday, November 2, while crypto.news and The Block place the statement on Tuesday, November 3, after a final 250 BTC transfer on November 2, but direct federation withdrawals remain under enhanced controls.
Key takeaways
Every LBTC is again backed by one bitcoin.
Four recovery deposits supplied roughly 602.5 BTC.
Provider swaps have reopened; direct withdrawals retain restrictions.
How the exploit drained Liquid’s reserves
A transaction-verification flaw in Elements , Liquid Network’s underlying software, allowed an attacker to create approximately 4,000 LBTC without depositing bitcoin. Liquid is a Bitcoin sidechain operated by a federation led by Blockstream, with LBTC designed to represent bitcoin held in reserve.
Blockstream’s incident assessment traced the flaw to cached range-proof verification. The attacker converted the unbacked tokens into bitcoin through SideSwap , a federation member authorized to process withdrawals.
Reserves fell from approximately 4,205 BTC to 197 BTC following the unauthorized transactions and other withdrawals before operations stopped. Liquid said operators were not hacked and no keys were compromised.
The attacker returned 3,400 BTC on September 7 after Blockstream patched affected bridge nodes, leaving roughly 600 BTC unrecovered.
Liquid Network restores bitcoin backing through four deposits
Four deposits totaling approximately 602.5 BTC completed the reserve recovery . SideSwap confirmed the sequence: 2.5 BTC on October 27, 50 BTC on October 28, then 300 BTC and 250 BTC on November 2.
By November 3, updated reserve figures showed 4,270.54 BTC backing an equivalent amount of LBTC. The federation’s public dashboard displays reserve balances, and Liquid node operators can independently verify the backing.
Swaps reopen under enhanced withdrawal controls
Users can exchange bitcoin and LBTC through participating providers, while direct federation withdrawals remain subject to additional security and operational requirements. SideSwap reopened conversions on October 20 at a 1:1 rate, less a 0.1% fee .
SideSwap funds these payouts through its own bitcoin wallet, which must be topped up by hand, and according to the provider, withdrawal requests can end up waiting in line whenever that balance gets too low.
Blockstream released Elements v23.3.4 on September 9 to address the vulnerability. Liquid resumed block production that day and user transactions on September 10. The recovery work also includes an independent security review and updated withdrawal-authorization procedures involving offline bitcoin keys.
With Liquid Network’s bitcoin backing restored, the federation is preparing governance changes, clearer oversight responsibilities, and additional technical and operational safeguards. Its statement, dated Monday, November 2 by the primary report and Tuesday, November 3 by crypto.news and The Block, promised further details “in the coming weeks.”
Article produced with the assistance of artificial intelligence and reviewed by the editorial team.
