Blockstream's Liquid Network left $320 million in user funds frozen after a hack
Security & Exploits ·
Bloomberg and independent researchers say the freeze, which followed a September 6 breach, is the culmination of a fraud scheme they have been investigating for months.
Blockstream's Liquid Network, a Bitcoin-linked network associated with Adam Back, has not released user funds since the hack, despite public statements from Back and Samson Mow that researchers describe as misleading, according to a substack investigation. The $320 million figure marks the scale of funds still inaccessible to users as of the report. Investigators writing on the matter say they view the episode as the end stage of a multi-billion dollar fraud tied to Blockstream's operations.
Central to the allegations is Christopher Cook, who runs Blockstream's Bitcoin mining business and, researchers say, spent three years in prison for fraud without disclosing that conviction to investors while raising billions under the Blockstream name. The mining business itself is characterized in the investigation as a Ponzi-style structure, with new investor money used to pay earlier investors while returns as high as 20% a year were promised. Blockstream has sold Bitcoin cloud mining investments since 2021 through the Luxembourg platform STOKR, which researchers say presented itself as independent while being partly owned by Back, who was also taking Bitcoin loans from the platform.
Bloomberg has since published its own investigation confirming key elements of these claims, according to leviathan.news, with investors and vendors reportedly still unpaid. The timeline researchers lay out includes an April feature in The New York Times naming Back the likeliest inventor of Bitcoin, followed two months later by a push in front of American investors for a new company built around holding Bitcoin, using a custodian, Komainu, described as not independent. Researchers argue the Times coverage may have been used to raise Back's profile ahead of that fundraising effort.
Other strains on Blockstream preceded the hack: Cantor Fitzgerald ended a planned multi-billion dollar US stock listing on August 20, after which Back's side agreed to pay Cantor $15 million to exit an agreement both parties could otherwise have walked from without cost.
What remains unresolved is whether the frozen $320 million will be returned to users, and how Blockstream, Back, and Mow will respond to the fraud characterization now that Bloomberg's reporting has corroborated parts of the independent investigation. Also unaddressed is the status of investors who bought into the mining and STOKR-linked offerings without knowledge of Cook's conviction or the ownership ties researchers describe.