Blockstream refuses payout demand after Liquid bitcoin theft
Blockstream has rejected a demand to surrender part of the bitcoin still held after the $320 million Liquid Network exploit, saying it will not pay a ransom and will pursue lawful recovery of the remaining funds. The company said on September 11 that taking assets without authorisation and withholding their return constituted theft rather than responsible security disclosure. It warned that,…
Blockstream has declined to pay a ransom demanded for funds still held following a $320 million theft from the Liquid Network. The company stated that taking assets without authorization and refusing to return them constitutes theft, not responsible security disclosure. Blockstream warned it would collaborate with law enforcement, exchanges, and blockchain forensic specialists to trace the remaining bitcoin if it was not returned.
Around 4,000 BTC were taken from Liquid's federation reserves on September 6 due to an exploit in the network's transaction-validation software, worth approximately $320 million at the time. After the attackers returned 3,400 BTC the next day, around 598.5 BTC remained unaccounted for, valued at roughly $47 million when Blockstream made its latest statement.
Liquid Network's exploit was caused by a flaw in the way nodes cached verification of range proofs used in confidential transactions, allowing attackers to generate invalid tokens that were then converted into real bitcoin held by the federation. Blockstream released an emergency update to address the vulnerability and warned users about phishing attempts.
The incident caused the federation's bitcoin reserve to drop sharply and led to a temporary halt in network activity while the vulnerability was investigated.
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