Blockstream Refuses Ransom Demand, Vows to Recover Stolen Bitcoin

Blockstream has refused to negotiate further with hackers who stole 4,000 BTC from its Liquid network last week. In a statement on X, Blockstream said that the hackers still have time to return the funds before the company will work with law enforcement.

The hackers exploited an inflation bug on the Liquid sidechain to create over 4,000 LBTC tokens that did not exist before and cashed them out for real BTC. They then negotiated with Blockstream via messages written into Bitcoin blocks, demanding a ransom in exchange for returning most of the stolen funds.

Blockstream stated that it will not pay a ransom for the return of stolen funds, calling the hackers' actions 'theft' rather than 'responsible disclosure.' The company will work with law enforcement and other relevant parties to trace and recover the assets and identify those responsible.

In related news, white-hat hackers withdrew about $320 million from the federation wallet that backs Liquid on Sunday. They returned most of the funds but kept 598.5 coins worth over $46 million as ransom, demanding that Blockstream pay 10% of the stolen BTC as a 'bug bounty' or face a 15% loss for its users.