Liquid peg-outs remain suspended 35 days after exploit as audit of Elements continues

Attackers returned most of the funds but kept 598.5 BTC

The incident began when self-described white hat hackers exploited the Liquid layer-two network and removed close to 4,000 BTC from the protocol. By Sept. 7, 2026, the attackers had sent back about 3,400 BTC.

They kept 598.5 BTC and argued that Blockstream, the creator of Liquid, owed them a 10% bounty. Blockstream rejected that demand and called for the immediate return of the remaining bitcoin. More than a month later, that position has not changed and the funds are still in the same wallet.

As of Sunday, Oct. 11, 2026, the address was still holding 598.5 BTC, valued by the source article at $49.69 million. The wallet has also drawn repeated address-poisoning attempts and unusual messages embedded through OP_RETURN transactions.

Redemptions stay frozen as technical review continues

Liquid said peg-out operations are still down pending further work to restore them safely. According to the network’s update, an independent external security audit of Elements v23.3.4 is in progress as part of that effort.

At the same time, the Liquid Federation is coordinating changes to the PAK list. That process includes replacing existing entries and making sure peg-out keys are properly secured in cold storage.

The network described those steps as necessary before secure peg-outs can resume. It has not provided a confirmed timeline for when LBTC holders will again be able to redeem directly for bitcoin.

User frustration grows during the delay

The extended pause has triggered growing criticism from Liquid users who have spent weeks waiting for LBTC-to-BTC redemptions to reopen. Public discussion on social media has reflected rising impatience with both the duration of the outage and Blockstream’s handling of the aftermath.

The source article pointed to at least one longtime Blockstream supporter who said the company’s response had started to damage their confidence. That sentiment appears to be part of a broader frustration among users still unable to access normal exit routes from the network.

Some holders turn to alternative routes

With no firm peg-out restart date, some LBTC holders have looked for workarounds through other applications rather than waiting for the official redemption process to return. Social media discussions cited in the source describe users moving funds through alternative services to get back into bitcoin outside the standard peg-out mechanism.

One user said the process took weeks because of limited liquidity and involved roughly 5% in spread and fees across Sideswap and Sideshift.ai. For now, the only confirmed next steps from the network are the completion of the external audit and the federation’s PAK list update, both of which Liquid has framed as prerequisites for restoring peg-outs securely.