A vulnerability in Elements, the open-source software used by Blockstream’s Liquid Bitcoin sidechain, allowed an attacker to create about 4,000 L-BTC without a matching bitcoin deposit on 6 September. The newly minted tokens passed validation and were converted through a normal peg-out, prompting federation signers to release 3,996.02 BTC. The exploit relied on a flawed cache key for confidential-transaction range proofs, allowing later data to reuse a previously validated result. Blockstream said the incident did not compromise federation keys or SideSwap’s peg-out authorization key. SideSwap, a non-custodial Liquid asset application, acknowledged that its online authorization key, automatic same-block forwarding and lack of payout limits helped turn the validation failure into a main-chain payment. It later returned about 4 BTC in fees, while 3,400 BTC was sent back to the federation on 7 September and about 598.5 BTC remained at the receiving address. Liquid paused bridge operations, resumed restricted block production on 10 September and reopened peg-ins on 11 September, but peg-outs remained suspended. The outstanding coins and the final arrangement for covering the reserve shortfall were unresolved in the published documents, and Blockstream had not responded to questions about the remainder by publication time.