Foley's killers demanded release of female terrorist

The terrorists who murdered James Foley had previously demanded the release of a female terrorist nicknamed Lady Al-Qaeda in exchange for the US journalist.

ISIS sent a laundry list of ransom demands to the US, including setting free Aafia Siddiqui, a Pakistani-born neuroscientist currently behind bars in Texas.

The terrorists also demanded a $143 million payout to set the freelance reporter free, the New York Times reports.

Siddiqui is considered an al-Qaeda courier and fundraiser who was arrested in Afghanistan in 2008 carrying documents on dirty bombs, chemical weapons and viruses.

But Islamic militants have presented Siddiqui as a "damsel in distress" who is being persecuted for her faith.

When Siddiqui was being interrogated by US soldiers and FBI officers she allegedly grabbed a rifle and fired at her interviewers, leading to her being shot and wounded herself.

The US refused to pay the ransom or release Siddiqui, leading to Foley's gruesome execution earlier this week.

Overnight US Defence Secretary Chuck Hagel revealed the US attempted a rescue of American hostages including Foley in recent months.

"Earlier this summer, the United States attempted the rescue of a number of American hostages held in Syria, including Jim Foley," Mr Hagel said.

"We all regret that mission did not succeed, but I'm very proud of the US forces that participated in it."

Mr Hagel said the execution of the rescue was flawless but the hostages were not where the Pentagon believed they would be.