This is not unexpected for LiPo batteries. The anode in LiPo battery packs degrades overtime and outgasses oxygen which is why the packs puff up. This by itself won't cause an explosion but if you puncture the pack and expose it to water or flame you might get some fireworks.
I confirm that; I did my own battery replacement on old iPhone4 that I bought cheaply on Amazon. Year later I changed the phone and never cared to sell this one. Fast forward this year to garage cleanup - same picture the battery inside expanded dramatically destroying the case. Little I know I left it outside for recycling to pick it up. Next morning all my trash is splattered everywhere and neighbor said he hear explosion. The battery got wet and exploded! I took tons of photos but it was on my previous iPhone so unable to upload any at the moment.
That's interesting, I assumed the reaction was rapid but I didn't see it happen. It's not obvious in the pics, but 2 stacked cells in the pack swelled, so I assumed it involved an electrical issue.
Related question - best way to safely dispose of old LiPo batteries? I don't want to just toss it in the regular trash (for one thing, might ignite in there.)
I.r.o. the latter question, ask the local recycling company.
Batteries are a fire hazard and a heavy pollutant if thrown in the regular trash, but most of the raw materials can be recycled if disposed of properly.
