Liquid Network, a Bitcoin-based payments and settlement platform, has suffered a security incident in which alleged white-hat hackers withdrew about $320 million worth of Bitcoin from its federation wallet.

The network disclosed the incident on Sunday in a post on X, stating that approximately 4,000 BTC had been withdrawn from the Liquid Federation wallet.

In response, Liquid Network temporarily disabled its bridge nodes, halting the submission of new transactions and effectively pausing its sidechain as federation members work to contain and resolve the incident.

Liquid Network said the funds were withdrawn through the SideSwap PAK (Peg-out Authorization Key), while stressing that the key involved in the process had not been compromised.

Purported white-hat hackers have withdrawn ~4,000 BTC (~$320 million) from the Liquid Federation wallet,” Liquid Network said.

“What we know so far is that the funds were withdrawn via the SideSwap PAK (Peg-out Authorization Key), but that key was not compromised, nor were any others,” it added.

Liquid Network said the Blockstream team is working to contact the parties involved on-chain through a signed message, although it has not publicly identified those responsible for the withdrawal.

The network added that cryptocurrency exchanges had been notified of the incident and had either suspended or were preparing to suspend LBTC deposits and withdrawals.

“Effectively, the Liquid sidechain is paused until this issue is resolved,” the network said.

Liquid Network also warned that the disruption would affect users of Liquid wallets.

“Liquid wallets will be impacted, and we’re sorry for any inconvenience,” Liquid Network said.

The incident comes amid a series of major security breaches and exploits across the cryptocurrency industry, resulting in substantial financial losses for investors, exchanges and blockchain platforms.