Blockstream rejects ransom demand from blackmailers for 600 BTC after Liquid Network was hacked

Blockstream firmly rejects extortion from Liquid Network attackers: Never pay ransom

Blockstream issued a tough statement, clearly rejecting extortion demands for recent vulnerability attacks on Liquid Network, one of Bitcoin's main sidechains. Although negotiations are continuing, the company made it clear that it will not pay any ransom to recover the nearly 600 bitcoins still controlled by the attackers.

Details of the Liquid Network breach

On September 6, attackers used a vulnerability in the Liquid Network to minted approximately 4,000 L-BTC tokens without providing the required Bitcoin collateral. Later, they exchanged these synthetic tokens into nearly 4,000 real bitcoins through SideSwap's peg (redemption) system and withdrew them directly from the Liquid Alliance Reserve.

The structure of the Liquid Network stipulates that each L-BTC must be fully supported by the bitcoins held by the Liquid Alliance on a 1:1 ratio. Before the leak, approximately 4,200 BTC were stored in the reserve wallet. The breach resulted in the loss of approximately 95% of the position, with a value of approximately US$320 million at the time of the incident.

After the attack, the groups involved returned most of the stolen funds. On September 7, approximately 3,400 BTC items were transferred back to the Liquid Alliance, accounting for approximately 85% of the original stolen amount. However, the attackers still control nearly 600 BTC, worth tens of millions of dollars.

Blockstream's response and legal action

Blockstream made it clear that it would not participate in any form of extortion scheme. The company pointed out that it does not believe the incident was the work of a white-hat hacker and will not use payments to reward criminal behavior. The company emphasized this position in an official statement:

"We will never be part of a precedent where developers of open source software designed to benefit the Bitcoin community have to pay huge ransoms that far exceed their economic participation."

The company added that if the remaining bitcoins are not returned, they will be committed to seeking all available legal remedies and warn the perpetrators that their digital footprints have been permanently recorded on the blockchain.

Blockstream also pointed to the broader impact of the move on the Bitcoin ecosystem, arguing that succumbing to such requirements could pose serious risks for open source developers. Company leadership, including former chief strategy officer Samson Mow, continues to update recovery progress and makes it clear that recovering all stolen assets remains a top priority.

Continuous recovery and technical response

After the leak occurred, Blockstream released Elements v23.3.4 to fix the exploited vulnerability. At present, block production has resumed, and Liquid Network transactions are also being processed normally. However, since nearly 600 BTC pieces have not been recovered, the Backing ratio of L-BTC is only about 85%.

Samson Mow pointed out that the network has stabilized, but emphasized that full support ratios can only be restored after the remaining funds are recovered. Blockstream reiterated that Bitcoin transactions are always auditable and that every transfer is permanently recorded on the blockchain.

"Transactions will not disappear, nor will the evidence they leave."

The company encourages responsible persons to voluntarily return the remaining coins.

Industry observers point out that the importance of resilient infrastructure and transparent market operations is becoming increasingly prominent. While traditional markets rely on sophisticated brokers, a shift is happening as Wall Street increasingly explores Web3. Investors can now hold tokenized assets, such as stocks of major U.S. companies, gold and silver, directly in their crypto wallets through platforms that automatically aggregate best market prices and eliminate the need for intermediaries.

Blockstream retains the possibility of resolving the incident without further escalation, saying it is still feasible to resolve the issue responsibly. The company promises to continue to recover all stolen bitcoins and protect its open source community.