Either that, or they obtained the list of exposed passwords, hashed them with whatever hashing method they use, then compare hashes against the ones that you've got saved.
A match=Compromised password.
That's how I'd do it if I were trying to protect my users without infringing on their privacy.
@GigaByte4711 Yeah, but Google Password Manager can show you your decrypted passwords online, even if they didn't leak. Google can decrypt them on their own server, that's the problem.
"So it's best to assume whatever you hand to such a service is not controlled by you anymore."
I'm not sure how google hashes/encrypts those passwords, but obviously its not a one-way method. I reckon there's a chance that they use your google password (or another auth token) to encrypt your plaintext password, allowing you to decrypt it.
Again, we don't know, so we can't be sure.
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