Liquid Network remains halted after an abnormal SideSwap peg-out released about 3,996 BTC, valued near $320 million, from its federation reserve. SideSwap said a customer submitted 4,000 L-BTC and the request passed normal authorization using a valid Peg-out Authorization Key, while Liquid and SideSwap said neither that key nor federation signing keys were compromised. The incident has been attributed to an Elements software flaw that created L-BTC without matching Bitcoin backing, allowing it to be redeemed through an apparently ordinary peg-out. Reserves fell from roughly 4,200 BTC to around 200 BTC, leaving remaining L-BTC broadly matched by federation-held Bitcoin. The self-described whitehats offered to return most of the funds only after the vulnerability is fixed and every federation node is updated. Liquid said a fix had been added to its underlying software five weeks before the incident, but Blockstream has not explained the flaw or announced a restoration timetable.