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CONCLUSIONS
The key derivation is not hardware bound. Instead of using a real hardware key which cannot be extracted by software (for example, the SHK), the KeyMaster application uses a key derived from the SHK and directly available to TrustZone.
OEMs can comply with law enforcement to break Full Disk Encryption. Since the key is available to TrustZone, OEMs could simply create and sign a TrustZone image which extracts the KeyMaster keys and flash it to the target device. This would allow law enforcement to easily brute-force the FDE password off the device using the leaked keys.
Patching TrustZone vulnerabilities does not necessarily protect you from this issue. Even on patched devices, if an attacker can obtain the encrypted disk image (e.g. by using forensic tools), they can then "downgrade" the device to a vulnerable version, extract the key by exploiting TrustZone, and use them to brute-force the encryption. Since the key is derived directly from the SHK, and the SHK cannot be modified, this renders all down-gradable devices directly vulnerable.
Android FDE is only as strong as the TrustZone kernel or KeyMaster. Finding a TrustZone kernel vulnerability or a vulnerability in the KeyMaster trustlet, directly leads to the disclosure of the KeyMaster keys, thus enabling off-device attacks on Android FDE.