They're actually broadcast spawners... I had the pleasure(?) of watching it happen once in a friends tank. ALL of the worms quickly stuck out of their hiding holes a few at a time and shot fluid into the water column. This happened while his skimmer was broken down waiting for a new pump. Lucky worms. So they don't appear to lay eggs but thats all I know about their reproduction.
You'll be amazed at what can appear out of liverock months or even years after you add it.
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