Blockstream Says No to Ransom After Bitcoin Sidechain Exploit Leaves $47M Unrecovered

source: Decrypt

Blockstream has refused to pay a ransom for the return of roughly 598.5 Bitcoin, worth about $47 million, still held by the people behind the Liquid Network exploit, according to reporting by Decrypt published Friday.

The company ended days of negotiation and said it would pursue law enforcement, exchanges, and forensic specialists if the funds are not returned.

Blockstream characterized the incident as straightforward theft. Taking assets without permission and refusing to return them, the company said, is a crime, and the attackers' claim to responsible disclosure does not hold.

It rejected the attackers' claim to white-hat status outright.

How the Exploit Worked

The breach began September 6, when attackers drained close to 4,000 Bitcoin, then valued at roughly $320 million, from the federation reserve behind Liquid Network.

As reported by TradingView via U.Today, the attackers exploited a flaw in how Liquid nodes verified range proofs, which allowed them to mint unbacked Liquid Bitcoin (L-BTC) without any real Bitcoin behind it.

They submitted that phantom L-BTC through SideSwap's peg-out infrastructure and received genuine BTC from the federation's reserves in return.

The federation wallet held roughly 4,200 BTC before the attack, meaning the exploit stripped out about 95 percent of those reserves.