Krebs on Security

Tenn. Firm Sues Bank Over $327K Cyberheist

August 13, 2014

An industrial maintenance and construction firm in Tennessee that was hit by a $327,000 cyberheist is suing its financial institution to recover the stolen funds, charging the bank with negligence and breach of contract. Court-watchers say the lawsuit — if it proceeds to trial — could make it easier and cheaper for cyberheist victims to recover losses.

In May, 2012, Kingsport, Tenn.-based Tennessee Electric Company Inc. (now TEC Industrial) was the target of a corporate account takeover that saw cyber thieves use a network of more than four dozen money mules to siphon $327,804 out of the company’s accounts at TriSummit Bank.

TriSummit was able to claw back roughly $135,000 of those unauthorized transfers, leaving Tennessee Electric with a loss of $192,656. Earlier this month, the company sued TriSummit in state court, alleging negligence, breach of contract, gross negligence and fraudulent concealment.

Both companies declined to comment for this story. But as Tennessee Electric’s complaint (PDF) notes (albeit by misspelling my name), I called Tennessee Electric on May 10, 2012 to alert the company about a possible cyberheist targeting its accounts. I’d contacted the company after speaking with a money mule who’d acknowledged receiving thousands of dollars pulled from the firm’s accounts at TriSummit.

According to the complaint, the attackers first struck on May 8, after Tennessee Electric’s controller tried, unsuccessfully, to log into the bank’s site and upload that week’s payroll batch (typically from $200,000 to $240,000 per week). When the controller called TriSummit to inquire about the site problems, the bank said the site was probably undergoing maintenance and that the controller was welcome to visit the local bank branch and upload the file there. The controller did just that, uploading four payroll batches worth $202,664.47.

[SIDE NOTE: When I spoke with Tennessee Electric’s controller back in 2012, the controller for the company told me she was asked for and supplied the output of a one-time token upon login. This would make sense given the controller’s apparent problems accessing the bank’s Web site. Cyber thieves involved in these heists typically use password-stealing malware to control what the victim sees in his or her browser; when a victim logs in at a bank that requires a one-time token, the malware will intercept that token and then redirect the victim’s browser to an error page or a “down for maintenance” message — all the while allowing the thieves to use the one-time token and the victim’s credentials to log in as the legitimate user.]

On May 9, Tennessee Electric alleges, TriSummit Bank called to confirm the $202,664.47 payroll batch — as per an agreement the bank and the utility had which called for the bank to verbally verify all payment orders by phone. But according to Tennessee Electric, the bank for some reason had already approved a payroll draft of $327,804 to be sent to 55 different accounts across the United States — even though the bank allegedly never called to get verification of that payment order.

Tennessee Electric alleges that the bank only called to seek approval for the fraudulent batch on May 10, more than a day after having approved it and after I contacted Tennessee Electric to let them know they’d been robbed by the Russian cyber mob.

ANALYSIS

This lawsuit, if it heads to trial, could help set a more certain and even standard for figuring out who’s at fault when businesses are hit by cyberheists (for better or worse, most such legal challenges are overwhelmingly weighted toward banks and quietly settled for a fraction of the loss).

Consumers who bank online are protected by Regulation E, which dramatically limits the liability for consumers who lose money from unauthorized account activity online (provided the victim notifies their financial institution of the fraudulent activity within 60 days of receiving a disputed account statement).

Businesses, however, do not enjoy such protections. States across the country have adopted the Uniform Commercial Code (UCC), which holds that a payment order received by the [bank] is “effective as the order of the customer, whether or not authorized, if the security procedure is a commercially reasonable method of providing security against unauthorized payment orders, and the bank proves that it accepted the payment order in good faith and in compliance with the security procedure and any written agreement or instruction of the customer restricting acceptance of payment orders issued in the name of the customer.”

Under state interpretations of the UCC, the most that a business hit with a cyberheist can hope to recover is the amount that was stolen. That means that it’s generally not in the business’s best interests to sue their bank unless the amount of theft was quite high, because the litigation fees required to win a court battle can quickly equal or surpass the amount stolen. Continue reading →

Adobe, Microsoft Push Critical Security Fixes

August 12, 2014

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Adobe and Microsoft today each independently released security updates to fix critical problems with their products. Adobe issued patches for Adobe Reader/Acrobat, Flash Player and AIR, while Microsoft pushed nine security updates to address at least 37 security holes in Windows and related software.

Microsoft’s recommended patch deployment priority for enterprises, Aug. 2014.

Two of the nine update bundles Microsoft released today earned the company’s most-dire “critical” label, meaning the vulnerabilities fixed in the updates can be exploited by bad guys or malware without any help from users. A critical update for Internet Explorer accounts for the bulk of flaws addressed this month, including one that was actively being exploited by attackers prior to today, and another that was already publicly disclosed, according to Microsoft.

Other Microsoft products fixed in today’s release include Windows Media Center, One Note, SQL Server and SharePoint. Check out the Technet roundup here and the Microsoft Bulletin Summary Web page at this link.

There are a couple other important changes from Microsoft this month: The company announced that it will soon begin blocking out-of-date ActiveX controls for Internet Explorer users, and that it will support only the most recent versions of the .NET Framework and IE for each supported operating system (.NET is a programming platform required by a great many third-party Windows applications and is therefore broadly installed).

These changes are both worth mentioning because this month’s patch batch also includes Flash fixes (an ActiveX plugin on IE) and another .NET update. I’ve had difficulties installing large Patch Tuesday packages along with .NET updates, so I try to update them separately. To avoid any complications, I would recommend that Windows users install all other available recommended patches except for the .NET bundle; after installing those updates, restart Windows and then install any pending .NET fixes).

Finally, I should note that Microsoft released a major new version (version 5) of its Enhanced Mitigation Experience Toolkit (EMET), a set of tools designed to protect Windows systems even before new and undiscovered threats against the operating system and third-party software are formally addressed by security updates and antimalware software. I’ll have more on EMET 5.0 in an upcoming blog post (my review of EMET 4 is here) but this is a great tool that can definitely help harden Windows systems from attacks. If you already have EMET installed, you’ll want to remove the previous version and reboot before upgrading to 5.0. Continue reading →

Personalize Your Copy of Spam Nation

August 11, 2014

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Good news for fans of this blog who have not yet pre-ordered a copy of my upcoming book, Spam Nation. Politics & Prose, a literary landmark in the District of Columbia, will be helping me launch a six-city book tour, and is offering a personalized message from this author for anyone who pre-orders a copy of Spam Nation through the D.C. store’s Web site.

Use this link to purchase from Politics & Prose and receive a signed and personalized print copy of Spam Nation. The offer is good through November 18. Please send your proof-of-purchase to spamnation@sourcebookspr.com. Buyers have the option of picking the book up in the store, or having it shipped.

Other cities that we will visit on the book tour include Austin, Chicago, New York, San Francisco and Seattle. Stay tuned for more information about those events.

And as always, thank you for your readership!

New Site Recovers Files Locked by Cryptolocker Ransomware

August 6, 2014

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Until today, Microsoft Windows users who’ve been unfortunate enough to have the personal files on their computer encrypted and held for ransom by a nasty strain of malware called CryptoLocker have been faced with a tough choice: Pay cybercrooks a ransom of a few hundred to several thousand dollars to unlock the files, or kiss those files goodbye forever. That changed this morning, when two security firms teamed up to launch a free new online service that can help victims unlock and recover files scrambled by the malware.

First spotted in September 2013, CryptoLocker is a prolific and very damaging strain of malware that uses strong encryption to lock files that are likely to be the most valued by victim users, including Microsoft Office documents, photos, and MP3 files.

Infected machines typically display a warning that the victim’s files have been locked and can only be decrypted by sending a certain fraction or number of Bitcoins to a decryption service run by the perpetrators. Victims are given 72 hours to pay the ransom — typically a few hundred dollars worth of Bitcoins — after which time the ransom demand increases fivefold or more.

But early Wednesday morning, two security firms – Milpitas, Calf. based FireEye and Fox-IT in the Netherlands — launched decryptcryptolocker.com, a site that victims can use to recover their files. Victims need to provide an email address and upload just one of the encrypted files from their computer, and the service will email a link that victims can use to download a recovery program to decrypt all of their scrambled files.

The free decryption service was made possible because Fox-IT was somehow able to recover the private keys that the cybercriminals who were running the CryptoLocker scam used on their own (not free) decryption service. Neither company is disclosing much about how exactly those keys were recovered other than to say that the opportunity arose as the crooks were attempting to recover from Operation Tovar, an international effort in June that sought to dismantle the infrastructure that CryptoLocker used to infect PCs.

Continue reading →

Q&A on the Reported Theft of 1.2B Email Accounts

August 6, 2014

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My phone and email have been flooded with questions and interview requests from various media outlets since security consultancy Hold Security dropped the news that a Russian gang has stolen more than a billion email account credentials. Rather than respond to each of these requests in turn, allow me to add a bit of perspective here in the most direct way possible: The Q&A.

Q: Who the heck is Alex Holden?

A: I’ve known Hold Security’s Founder Alex Holden for nearly seven years. Coincidentally, I initially met him in Las Vegas at the Black Hat security convention (where I am now). Alex is a talented and tireless researcher, as well as a forthright and honest guy. He is originally from Ukraine, and speaks/reads Russian and Ukrainian fluently. His research has been central to several of my big scoops over the past year, including the breach at Adobe that exposed tens of millions of customer records.

Q: Is this for real?

A: Alex isn’t keen on disclosing his methods, but I have seen his research and data firsthand and can say it’s definitely for real. Without spilling his secrets or methods, it is clear that he has a first-hand view on the day-to-day activities of some very active organized cybercrime networks and actors.

Q: Ok, but more than a billion credentials? That seems like a lot.

A: For those unfamiliar with the operations of large-scale organized crime syndicates, yes, it does. Unfortunately, there are more than a few successful cybercrooks who are quite good at what they do, and do it full-time. These actors — mostly spammers and malware purveyors (usually both) — focus on acquiring as many email addresses and account credentials as they can. Their favorite methods of gathering this information include SQL injection (exploiting weaknesses in Web sites that can be used to force the site to cough up user data) and abusing stolen credentials to steal even more credentials from victim organizations.

One micro example of this: Last year, I wrote about a botnet that enslaved thousands of hacked computers which disguised itself as a legitimate add-on for Mozilla Firefox and forced infected PCs to scour Web sites for SQL vulnerabilities. Continue reading →

‘White Label’ Money Laundering Services

August 4, 2014

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Laundering the spoils from cybercrime can be a dicey affair, fraught with unreliable middlemen and dodgy, high-priced services that take a huge cut of the action. But large-scale cybercrime operations can avoid these snares and become much more profitable when they’re able to disguise their operations as legitimate businesses operating in the United States, and increasingly they are doing just that.

The typical process of “cashing out” stolen credit card accounts.

Today’s post looks at one such evolution in a type of service marketed to cybercrooks that has traditionally been perhaps the most common way that thieves overseas “cash out” cybercrimes committed against American and European businesses, banks and consumers: The reshipping of goods purchased through stolen credit cards.

Cybercrooks very often rely on international reshipping services to help move electronics and other goods that are bought with stolen credit cards, shipped abroad, and then sold for cash. Many fraudsters use stolen credit cards to pay for U.S. Postal Service and FedEx shipping labels — a.k.a. “black labels” — but major shipping providers appear to be getting better at blocking or intercepting packages sent with stolen credit cards (at least according to anecdotal evidence from the cybercrime forums).

As a result, crooks increasingly are turning to a more reliable freight: So-called “white label” shipping services that are paid for with cybercrime-funded bank accounts via phony but seemingly legitimate companies in the United States. Continue reading →

Sandwich Chain Jimmy John’s Investigating Breach Claims

July 31, 2014

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Sources at a growing number of financial institutions in the United States say they are tracking a pattern of fraud that indicates nationwide sandwich chain Jimmy John’s may be the latest retailer dealing with a breach involving customer credit card data. The company says it is working with authorities on an investigation.

Multiple financial institutions tell KrebsOnSecurity that they are seeing fraud on cards that have all recently been used at Jimmy John’s locations.

Champaign, Ill.-based Jimmy John’s initially did not return calls seeking comment for two days. Today, however, a spokesperson for the company said in a short emailed statement that “Jimmy John’s is currently working with the proper authorities and investigating the situation. We will provide an update as soon as we have additional information.”

The unauthorized card activity witnessed by various financial institutions contacted by this author is tied to so-called “card-present” fraud, where the fraudsters are able to create counterfeit copies of stolen credit cards. Continue reading →

Hackers Plundered Israeli Defense Firms that Built ‘Iron Dome’ Missile Defense System

July 28, 2014

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Three Israeli defense contractors responsible for building the “Iron Dome” missile shield currently protecting Israel from a barrage of rocket attacks were compromised by hackers and robbed of huge quantities of sensitive documents pertaining to the shield technology, KrebsOnSecurity has learned.

The never-before publicized intrusions, which occurred between 2011 and 2012, illustrate the continued challenges that defense contractors and other companies face in deterring organized cyber adversaries and preventing the theft of proprietary information.

A component of the ‘Iron Dome’ anti-missile system in operation, 2011.

According to Columbia, Md.-based threat intelligence firm Cyber Engineering Services Inc. (CyberESI), between Oct. 10, 2011 and August 13, 2012, attackers thought to be operating out of China hacked into the corporate networks of three top Israeli defense technology companies, including Elisra Group, Israel Aerospace Industries, and Rafael Advanced Defense Systems.

By tapping into the secret communications infrastructure set up by the hackers, CyberESI determined that the attackers exfiltrated large amounts of data from the three companies. Most of the information was intellectual property pertaining to Arrow III missiles, Unmanned Aerial Vehicles (UAVs), ballistic rockets, and other technical documents in the same fields of study.

Joseph Drissel, CyberESI’s founder and chief executive, said the nature of the exfiltrated data and the industry that these companies are involved in suggests that the Chinese hackers were looking for information related to Israel’s all-weather air defense system called Iron Dome.

The Israeli government has credited Iron Dome with intercepting approximately one-fifth of the more than 2,000 rockets that Palestinian militants have fired at Israel during the current conflict. The U.S. Congress is currently wrangling over legislation that would send more than $350 million to Israel to further development and deployment of the missile shield technology. If approved, that funding boost would make nearly $1 billion from the United States over five years for Iron Dome production, according to The Washington Post.

Neither Elisra nor Rafael responded to requests for comment about the apparent security breaches. A spokesperson for Israel Aerospace Industries brushed off CyberESI’s finding, calling it “old news.” When pressed to provide links to any media coverage of such a breach, IAI was unable to locate or point to specific stories. The company declined to say whether it had alerted any of its U.S. industry partners about the breach, and it refused to answer any direct questions regarding the incident.

“At the time, the issue was treated as required by the applicable rules and procedures,” IAI Spokeswoman Eliana Fishler wrote in an email to KrebsOnSecurity. “The information was reported to the appropriate authorities. IAI undertook corrective actions in order to prevent such incidents in the future.”

Drissel said many of the documents that were stolen from the defense contractors are designated with markings indicating that their access and sharing is restricted by International Traffic in Arms Regulations (ITAR) — U.S. State Department controls that regulate the defense industry. For example, Drissel said, among the data that hackers stole from IAI is a 900-page document that provides detailed schematics and specifications for the Arrow 3 missile.

“Most of the technology in the Arrow 3 wasn’t designed by Israel, but by Boeing and other U.S. defense contractors,” Drissel said. “We transferred this technology to them, and they coughed it all up. In the process, they essentially gave up a bunch of stuff that’s probably being used in our systems as well.”

WHAT WAS STOLEN, AND BY WHOM?

According to CyberESI, IAI was initially breached on April 16, 2012 by a series of specially crafted email phishing attacks. Drissel said the attacks bore all of the hallmarks of the “Comment Crew,” a prolific and state-sponsored hacking group associated with the Chinese People’s Liberation Army (PLA) and credited with stealing terabytes of data from defense contractors and U.S. corporations.

Image: FBI

The Comment Crew is the same hacking outfit profiled in a February 2013 report by Alexandria, Va. based incident response firm Mandiant, which referred to the group simply by it’s official designation — “P.L.A. Unit 61398.” In May 2014, the U.S. Justice Department charged five prominent military members of the Comment Crew with a raft of criminal hacking and espionage offenses against U.S. firms. Continue reading →

Service Drains Competitors’ Online Ad Budget

July 25, 2014

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The longer one lurks in the Internet underground, the more difficult it becomes to ignore the harsh reality that for nearly every legitimate online business there is a cybercrime-oriented anti-business. Case in point: Today’s post looks at a popular service that helps crooked online marketers exhaust the Google AdWords budgets of their competitors.

Youtube ads from “GoodGoogle” pitching his AdWords click fraud service.

AdWords is Google’s paid advertising product, displaying ads on the top or the right side of your screen in search results. Advertisers bid on specific keywords, and those who bid the highest will have their ads show up first when Internet users search for those terms. In turn, advertisers pay Google a small amount each time a user clicks on one of their ads.

One of the more well-known forms of online ad fraud (a.k.a. “click fraud“) involves Google AdSense publishers that automate the clicking of ads appearing on their own Web sites in order to inflate ad revenue. But fraudsters also engage in an opposite scam involving AdWords, in which advertisers try to attack competitors by raising their costs or exhausting their ad budgets early in the day.

Enter “GoodGoogle,” the nickname chosen by one of the more established AdWords fraudsters operating on the Russian-language crime forums. Using a combination of custom software and hands-on customer service, GoodGoogle promises clients the ability to block the appearance of competitors’ ads.

“Are you tired of the competition in Google AdWords that take your first position and quality traffic,?” reads GoodGoogle’s pitch. “I will help you get rid once and for all competitors in Google Adwords.”

The service, which appears to have been in the offering since at least January 2012, provides customers both a la carte and subscription rates. The prices range from $100 to block between three to ten ad units for 24 hours to $80 for 15 to 30 ad units. For a flat fee of $1,000, small businesses can use GoodGoogle’s software and service to sideline a handful of competitors’s ads indefinitely. Fees are paid up-front and in virtual currencies (WebMoney, e.g.), and the seller offers support and a warranty for his work for the first three weeks. Continue reading →

Feds: Hackers Ran Concert Ticket Racket

July 23, 2014

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A Russian man detained in Spain is facing extradition to the United States on charges of running an international cyber crime ring that allegedly stole more than $10 million in electronic tickets from e-tickets vendor StubHub.

Vadim Polyakov, 30, was detained while vacationing in Spain. Polyakov is wanted on conspiracy charges to be unsealed today in New York, where investigators with the Manhattan District Attorney’s office and the U.S. Secret Service are expected to announce coordinated raids of at least 20 people in the United States, Canada and the United Kingdom accused of running an elaborate scam to resell stolen e-tickets and launder the profits.

Sources familiar with the matter describe Polyakov, from St. Petersburg, Russia, as the ringleader of the gang, which allegedly used thousands of compromised StubHub user accounts to purchase huge volumes of electronic, downloadable tickets that were fed to a global network of resellers.

Robert Capps, senior director of customer success for RedSeal Networks and formerly head of StubHub’s global trust and safety organization, said the fraud against StubHub — which is owned by eBay — largely was perpetrated with usernames and passwords stolen from legitimate StubHub customers. Capps noted that while banks have long been the target of online account takeovers, many online retailers are unprepared for the wave of fraud that account takeovers can bring.

“In the last year online retailers have come under significant attack by cyber criminals using techniques such as account takeover to commit fraud,” Capps said. “Unfortunately, the transactional risk systems employed by most online retailers are not tuned to detect and defend against malicious use of existing customer accounts. Retooling these systems to detect account takeovers can take some time, leaving retailers exposed to significant financial losses in the intervening time.”

Polyakov is the latest in a recent series of accused Russian hackers detained while traveling abroad and currently facing extradition to the United States. Dmitry Belorossov, a Russian citizen wanted in connection with a federal investigation into a cyberheist gang that leveraged the Gozi Trojan, also is facing extradition to the United States from Spain. He was arrested in Spain in August 2013 while attempting to board a flight back to Russia. Continue reading →

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