German Cops Raid “Cyberbunker 2.0,” Arrest 7 in Child Porn, Dark Web Market Sting

September 28, 2019
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German authorities said Friday they’d arrested seven people and were investigating six more in connection with the raid of a Dark Web hosting operation that allegedly supported multiple child porn, cybercrime and drug markets with hundreds of servers buried inside a heavily fortified military bunker. Incredibly, for at least two of the men accused in the scheme, this was their second bunker-based hosting business that was raided by cops and shut down for courting and supporting illegal activity online.

The latest busted cybercrime bunker is in Traben-Trarbach, a town on the Mosel River in western Germany. The Associated Press says investigators believe the 13-acre former military facility — dubbed the “CyberBunker” by its owners and occupants — served a number of dark web sites, including: the “Wall Street Market,” a sprawling, online bazaar for drugs, hacking tools and financial-theft wares before it was taken down earlier this year; the drug portal “Cannabis Road;” and the synthetic drug market “Orange Chemicals.”

German police reportedly seized $41 million worth of funds allegedly tied to these markets, and more than 200 servers that were operating throughout the underground temperature-controlled, ventilated and closely guarded facility.

The former military bunker in Germany that housed CyberBunker 2.0 and, according to authorities, plenty of very bad web sites.

The authorities in Germany haven’t named any of the people arrested or under investigation in connection with CyberBunker’s alleged activities, but said those arrested were apprehended outside of the bunker. Still, there are clues in the details released so far, and those clues have been corroborated by sources who know two of the key men allegedly involved.

We know the owner of the bunker hosting business has been described in media reports as a 59-year-old Dutchman who allegedly set it up as a “bulletproof” hosting provider that would provide Web site hosting to any business, no matter how illegal or unsavory.

We also know the German authorities seized at least two Web site domains in the raid, including the domain for ZYZTM Research in The Netherlands (zyztm[.]com), and cb3rob[.]org.

A “seizure” placeholder page left behind by German law enforcement agents after they seized cb3rob.org, an affiliate of the the CyberBunker bulletproof hosting facility owned by convicted Dutch cybercriminal Sven Kamphuis.

According to historic whois records maintained by Domaintools.com, Zyztm[.]com was originally registered to a Herman Johan Xennt in the Netherlands. Cb3rob[.]org was an organization hosted at CyberBunker registered to Sven Kamphuis, a self-described anarchist who was convicted several years ago for participating in a large-scale attack that briefly impaired the global Internet in some places.

Both 59-year-old Xennt and Mr. Kamphuis worked together on a previous bunker-based project — a bulletproof hosting business they sold as CyberBunker and ran out of a five-story military bunker in The Netherlands.

That’s according to Guido Blaauw, director of Disaster-Proof Solutions, a company that renovates and resells old military bunkers and underground shelters. Blaauw’s company bought the 1,800 square-meter Netherlands bunker from Mr. Xennt in 2011 for $700,000.

Guido Blaauw, in front of the original CyberBunker facility in the Netherlands, which he bought from Mr. Xennt in 2011. Image: Blaauw.

Media reports indicate that in 2002 a fire inside the CyberBunker 1.0 facility in The Netherlands summoned emergency responders, who discovered a lab hidden inside the bunker that was being used to produce the drug ecstasy/XTC.

Blaauw said nobody was ever charged for the drug lab, which was blamed on another tenant in the building. Blauuw said Xennt and others in 2003 were then denied a business license to continue operating in the bunker, and they were forced to resell servers from a different location — even though they bragged to clients for years to come about hosting their operations from an ultra-secure underground bunker.

“After the fire in 2002, there was never any data or servers stored in the bunker,” in The Netherlands, Blaauw recalled. “For 11 years they told everyone [the hosting servers where] in this ultra-secure bunker, but it was all in Amsterdam, and for 11 years they scammed all their clients.”

Firefighters investigating the source of a 2002 fire at the CyberBunker’s first military bunker in The Netherlands discovered a drug lab amid the Web servers. Image: Blaauw.

Blaauw said sometime between 2012 and 2013, Xennt purchased the bunker in Traben-Trarbach, Germany — a much more modern structure that was built in 1997. CyberBunker was reborn, and it began offering many of the same amenities and courted the same customers as CyberBunker 1.0 in The Netherlands.

“They’re known for hosting scammers, fraudsters, pedophiles, phishers, everyone,” Blaauw said. “That’s something they’ve done for ages and they’re known for it.”

The former Facebook profile picture of Sven Olaf Kamphuis, shown here standing in front of Cyberbunker 1.0 in The Netherlands.

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MyPayrollHR CEO Arrested, Admits to $70M Fraud

September 27, 2019
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Earlier this month, employees at more than 1,000 companies saw one or two paycheck’s worth of funds deducted from their bank accounts after the CEO of their cloud payroll provider absconded with $35 million in payroll and tax deposits from customers. On Monday, the CEO was arrested and allegedly confessed that the diversion was the last desperate gasp of a financial shell game that earned him $70 million over several years.

Michael T. Mann, the 49-year-old CEO of Clifton Park, NY-based MyPayrollHR, was arrested this week and charged with bank fraud. In court filings, FBI investigators said Mann admitted under questioning that in early September — on the eve of a big payroll day — he diverted to his own bank account some $35 million in funds sent by his clients to cover their employee payroll deposits and tax withholdings.

After that stunt, two different banks that work with Mann’s various companies froze those corporate accounts to keep the funds from being moved or withdrawn. That action set off a chain of events that led another financial institution that helps MyPayrollHR process payments to briefly pull almost $26 million out of checking accounts belonging to employees at more than 1,000 companies that use MyPayrollHR.

At the same time, MyPayrollHR sent a message (see screenshot above) to clients saying it was shutting down and that customers should find alternative methods for paying employees and for processing payroll going forward.

In the criminal complaint against Mann (PDF), a New York FBI agent said the CEO admitted that starting in 2010 or 2011 he began borrowing large sums of money from banks and financing companies under false pretenses.

“While stating that MyPayroll was legitimate, he admitted to creating other companies that had no purpose other than to be used in the fraud; fraudulently representing to banks and financing companies that his fake businesses had certain receivables that they did not have; and obtaining loans and lines of credit by borrowing against these non-existent receivables.”

“Mann estimated that he fraudulently obtained about $70 million that he has not paid back. He claimed that he committed the fraud in response to business and financial pressures, and that he used almost all of the fraudulently obtained funds to sustain certain businesses, and purchase and start new ones. He also admitted to kiting checks between Bank of America and Pioneer [Savings Bank], as part of the fraudulent scheme.”

Check-kiting is the illegal act of writing a check from a bank account without sufficient funds and depositing it into another bank account, explains MagnifyMoney.com. “Then, you withdraw the money from that second account before the original check has been cleared.”

Kiting also is known as taking advantage of the “float,” which is the amount of time between when an individual submits a check as payment and when the individual’s bank is instructed to move the funds from the account. Continue reading →

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Interview With the Guy Who Tried to Frame Me for Heroin Possession

September 25, 2019
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In April 2013, I received via U.S. mail more than a gram of pure heroin as part of a scheme to get me arrested for drug possession. But the plan failed and the Ukrainian mastermind behind it soon after was imprisoned for unrelated cybercrime offenses. That individual recently gave his first interview since finishing his jail time here in the states, and he’s shared some select (if often abrasive and coarse) details on how he got into cybercrime and why. Below are a few translated excerpts.

When I first encountered now-31-year-old Sergei “Fly,” “Flycracker,” “MUXACC” Vovnenko in 2013, he was the administrator of the fraud forum “thecc[dot]bz,” an exclusive and closely guarded Russian language board dedicated to financial fraud and identity theft.

Many of the heavy-hitters from other fraud forums had a presence on Fly’s forum, and collectively the group financed and ran a soup-to-nuts network for turning hacked credit card data into mounds of cash.

Vovnenko first came onto my radar after his alter ego Fly published a blog entry that led with an image of my bloodied, severed head and included my credit report, copies of identification documents, pictures of our front door, information about family members, and so on. Fly had invited all of his cybercriminal friends to ruin my financial identity and that of my family.

Somewhat curious about what might have precipitated this outburst, I was secretly given access to Fly’s cybercrime forum and learned he’d freshly hatched a plot to have heroin sent to my home. The plan was to have one of his forum lackeys spoof a call from one of my neighbors to the police when the drugs arrived, complaining that drugs were being delivered to our house and being sold out of our home by Yours Truly.

Thankfully, someone on Fly’s forum also posted a link to the tracking number for the drug shipment. Before the smack arrived, I had a police officer come out and take a report. After the heroin showed up, I gave the drugs to the local police and wrote about the experience in Mail From the Velvet Cybercrime Underground.

Angry that I’d foiled the plan to have me arrested for being a smack dealer, Fly or someone on his forum had a local florist send a gaudy floral arrangement in the shape of a giant cross to my home, complete with a menacing message that addressed my wife and was signed, “Velvet Crabs.”

The floral arrangement that Fly or one of his forum lackeys had delivered to my home in Virginia.

Vovnenko was arrested in Italy in the summer of 2014 on identity theft and botnet charges, and spent some 15 months in arguably Italy’s worst prison contesting his extradition to the United States. Those efforts failed, and he soon pleaded guilty to aggravated identity theft and wire fraud, and spent several years bouncing around America’s prison system.

Although Vovnenko sent me a total of three letters from prison in Naples (a hand-written apology letter and two friendly postcards), he never responded to my requests to meet him following his trial and conviction on cybercrime charges in the United States. I suppose that is fair: To my everlasting dismay, I never responded to his Italian dispatches (the first I asked to be professionally analyzed and translated before I would touch it).

Seasons greetings from my pen pal, Flycracker.

After serving his 41 month sentence in the U.S., Vovnenko was deported, although it’s unclear where he currently resides (the interview excerpted here suggests he’s back in Italy, but Fly doesn’t exactly confirm that). 

In an interview published on the Russian-language security blog Krober.biz, Vovnenko said he began stealing early in life, and by 13 was already getting picked up for petty robberies and thefts.

A translated English version of the interview was produced and shared with KrebsOnSecurity by analysts at New York City-based cyber intelligence firm Flashpoint. Continue reading →

Before He Spammed You, this Sly Prince Stalked Your Mailbox

September 18, 2019
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A reader forwarded what he briefly imagined might be a bold, if potentially costly, innovation on the old Nigerian prince scam that asks for help squirreling away millions in unclaimed fortune: It was sent via the U.S. Postal Service, with a postmarked stamp and everything.

In truth these old fashioned “advance fee” or “419” scams predate email and have circulated via postal mail in various forms and countries over the years.

The recent one pictured below asks for help in laundering some $11.6 million from an important dead person that anyway has access to a secret stash of cash. Any suckers who bite are strung along for weeks while imaginary extortionists or crooked employees at these bureaucratic institutions demand licenses, bribes or other payments before disbursing any funds. Those funds never arrive, no matter how much money the sucker gives up.

This type of “advance fee” or “419” scam letter is common in spam, probably less so via USPS.

It’s easy to laugh at this letter, because it’s sometimes funny when scammers try so hard. But then again, maybe the joke’s on us because sending these scams via USPS makes them even more appealing to the people most vulnerable: Older individuals with access to cash but maybe not all their marbles.  Continue reading →

Man Who Hired Deadly Swatting Gets 15 Months

September 17, 2019
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An Ohio teen who recruited a convicted serial “swatter” to fake a distress call that ended in the police shooting an innocent Kansas man in 2017 has been sentenced to 15 months in prison.

Image: FBI.gov

“Swatting” is a dangerous hoax that involves making false claims to emergency responders about phony hostage situations or bomb threats, with the intention of prompting a heavily-armed police response to the location of the claimed incident.

The tragic swatting hoax that unfolded on the night of Dec. 28, 2017 began with a dispute over a $1.50 wager in an online game “Call of Duty” between Shane M. Gaskill, a 19-year-old Wichita, Kansas resident, and Casey S. Viner, 18, from the Cincinnati, OH area.

Viner wanted to get back at Gaskill in grudge over the Call of Duty match, and so enlisted the help of another man — Tyler R. Barriss — a serial swatter in California known by the alias “SWAuTistic” who’d bragged of swatting hundreds of schools and dozens of private residences.

Chat transcripts presented by prosecutors showed Viner and Barriss both saying if Gaskill isn’t scared of getting swatted, he should give up his home address. But the address that Gaskill gave Viner to pass on to Barriss no longer belonged to him and was occupied by a new tenant.

Barriss’s fatal call to 911 emergency operators in Wichita was relayed from a local, non-emergency line. Barriss falsely claimed he was at the address provided by Viner, that he’d just shot his father in the head, was holding his mom and sister at gunpoint, and was thinking about burning down the home with everyone inside.

Wichita police quickly responded to the fake hostage report and surrounded the address given by Gaskill. Seconds later, 28-year-old Andrew Finch exited his mom’s home and was killed by a single shot from a Wichita police officer. Finch, a father of two, had no party to the gamers’ dispute and was simply in the wrong place at the wrong time. Continue reading →

NY Payroll Company Vanishes With $35 Million

September 11, 2019
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MyPayrollHR, a now defunct cloud-based payroll processing firm based in upstate New York, abruptly ceased operations this past week after stiffing employees at thousands of companies. The ongoing debacle, which allegedly involves malfeasance on the part of the payroll company’s CEO, resulted in countless people having money drained from their bank accounts and has left nearly $35 million worth of payroll and tax payments in legal limbo.

Unlike many stories here about cloud service providers being extorted by hackers for ransomware payouts, this snafu appears to have been something of an inside job. Nevertheless, it is a story worth telling, in part because much of the media coverage of this incident so far has been somewhat disjointed, but also because it should serve as a warning to other payroll providers about how quickly and massively things can go wrong when a trusted partner unexpectedly turns rogue.

Clifton Park, NY-based MyPayrollHR — a subsidiary of ValueWise Corp. — disclosed last week in a rather unceremonious message to some 4,000 clients that it would be shutting its virtual doors and that companies which relied upon it to process payroll payments should kindly look elsewhere for such services going forward.

This communique came after employees at companies that depend on MyPayrollHR to receive direct deposits of their bi-weekly payroll payments discovered their bank accounts were instead debited for the amounts they would normally expect to accrue in a given pay period.

To make matters worse, many of those employees found their accounts had been dinged for two payroll periods — a month’s worth of wages — leaving their bank accounts dangerously in the red.

The remainder of this post is a deep-dive into what we know so far about what transpired, and how such an occurrence might be prevented in the future for other payroll processing firms.

A $26 MILLION TEXT FILE

To understand what’s at stake here requires a basic primer on how most of us get paid, which is a surprisingly convoluted process. In a typical scenario, our employer works with at least one third party company to make sure that on every other Friday what we’re owed gets deposited into our bank account.

The company that handled that process for MyPayrollHR is a California firm called Cachet Financial Services. Every other week for more than 12 years, MyPayrollHR has submitted a file to Cachet that told it which employee accounts at which banks should be credited and by how much.

According to interviews with Cachet, the way the process worked ran something like this: MyPayrollHR would send a digital file documenting deposits made by each of these client companies which laid out the amounts owed to each clients’ employees. In turn, those funds from MyPayrollHR client firms then would be deposited into a settlement or holding account maintained by Cachet.

From there, Cachet would take those sums and disburse them into the bank accounts of people whose employers used MyPayrollHR to manage their bi-weekly payroll payments.

But according to Cachet, something odd happened with the instructions file MyPayrollHR submitted on the afternoon of Wednesday, Sept. 4 that had never before transpired: MyPayrollHR requested that all of its clients’ payroll dollars be sent not to Cachet’s holding account but instead to an account at Pioneer Savings Bank that was operated and controlled by MyPayrollHR.

The total amount of this mass payroll deposit was approximately $26 million. Wendy Slavkin, general counsel for Cachet, told KrebsOnSecurity that her client then inquired with Pioneer Savings about the wayward deposit and was told MyPayrollHR’s bank account had been frozen.

Nevertheless, the payroll file submitted by MyPayrollHR instructed financial institutions for its various clients to pull $26 million from Cachet’s holding account — even though the usual deposits from MyPayrollHR’s client banks had not been made. Continue reading →

Patch Tuesday, September 2019 Edition

September 10, 2019
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Microsoft today issued security updates to plug some 80 security holes in various flavors of its Windows operating systems and related software. The software giant assigned a “critical” rating to almost a quarter of those vulnerabilities, meaning they could be used by malware or miscreants to hijack vulnerable systems with little or no interaction on the part of the user.

Two of the bugs quashed in this month’s patch batch (CVE-2019-1214 and CVE-2019-1215) involve vulnerabilities in all supported versions of Windows that have already been exploited in the wild. Both are known as “privilege escalation” flaws in that they allow an attacker to assume the all-powerful administrator status on a targeted system. Exploits for these types of weaknesses are often deployed along with other attacks that don’t require administrative rights.

September also marks the fourth time this year Microsoft has fixed critical bugs in its Remote Desktop Protocol (RDP) feature, with four critical flaws being patched in the service. According to security vendor Qualys, these Remote Desktop flaws were discovered in a code review by Microsoft, and in order to exploit them an attacker would have to trick a user into connecting to a malicious or hacked RDP server.

Microsoft also fixed another critical vulnerability in the way Windows handles link files ending in “.lnk” that could be used to launch malware on a vulnerable system if a user were to open a removable drive or access a shared folder with a booby-trapped .lnk file on it.

Shortcut files — or those ending in the “.lnk” extension — are Windows files that link easy-to-recognize icons to specific executable programs, and are typically placed on the user’s Desktop or Start Menu. It’s perhaps worth noting that poisoned .lnk files were one of the four known exploits bundled with Stuxnet, a multi-million dollar cyber weapon that American and Israeli intelligence services used to derail Iran’s nuclear enrichment plans roughly a decade ago.

In last month’s Microsoft patch dispatch, I ruefully lamented the utter hose job inflicted on my Windows 10 system by the July round of security updates from Redmond. Many readers responded by saying one or another updates released by Microsoft in August similarly caused reboot loops or issues with Windows repeatedly crashing.

As there do not appear to be any patch-now-or-be-compromised-tomorrow flaws in the September patch rollup, it’s probably safe to say most Windows end-users would benefit from waiting a few days to apply these fixes.  Continue reading →

Secret Service Investigates Breach at U.S. Govt IT Contractor

September 9, 2019
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The U.S. Secret Service is investigating a breach at a Virginia-based government technology contractor that saw access to several of its systems put up for sale in the cybercrime underground, KrebsOnSecurity has learned. The contractor claims the access being auctioned off was to old test systems that do not have direct connections to its government partner networks.

In mid-August, a member of a popular Russian-language cybercrime forum offered to sell access to the internal network of a U.S. government IT contractor that does business with more than 20 federal agencies, including several branches of the military. The seller bragged that he had access to email correspondence and credentials needed to view databases of the client agencies, and set the opening price at six bitcoins (~USD $60,000).

A review of the screenshots posted to the cybercrime forum as evidence of the unauthorized access revealed several Internet addresses tied to systems at the U.S. Department of Transportation, the National Institutes of Health (NIH), and U.S. Citizenship and Immigration Services (USCIS), a component of the U.S. Department of Homeland Security that manages the nation’s naturalization and immigration system.

Other domains and Internet addresses included in those screenshots pointed to Miracle Systems LLC, an Arlington, Va. based IT contractor that states on its site that it serves 20+ federal agencies as a prime contractor, including the aforementioned agencies.

In an interview with KrebsOnSecurity, Miracle Systems CEO Sandesh Sharda confirmed that the auction concerned credentials and databases were managed by his company, and that an investigating agent from the Secret Service was in his firm’s offices at that very moment looking into the matter.

But he maintained that the purloined data shown in the screenshots was years-old and mapped only to internal test systems that were never connected to its government agency clients.

“The Secret Service came to us and said they’re looking into the issue,” Sharda said. “But it was all old stuff [that was] in our own internal test environment, and it is no longer valid.”

Still, Sharda did acknowledge information shared by Wisconsin-based security firm Hold Security, which alerted KrebsOnSecurity to this incident, indicating that at least eight of its internal systems had been compromised on three separate occasions between November 2018 and July 2019 by Emotet, a malware strain usually distributed via malware-laced email attachments that typically is used to deploy other malicious software.

The Department of Homeland Security did not respond to requests for comment, nor did the Department of Transportation. A spokesperson for the NIH said the agency had investigated the activity and found it was not compromised by the incident.

“As is the case for all agencies of the Federal Government, the NIH is constantly under threat of cyber-attack,” NIH spokesperson Julius Patterson said. “The NIH has a comprehensive security program that is continuously monitoring and responding to security events, and cyber-related incidents are reported to the Department of Homeland Security through the HHS Computer Security Incident Response Center.”

One of several screenshots offered by the dark web seller as proof of access to a federal IT contractor later identified as Arlington, Va. based Miracle Systems. Image: Hold Security.

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‘Satori’ IoT Botnet Operator Pleads Guilty

September 4, 2019
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A 21-year-old man from Vancouver, Wash. has pleaded guilty to federal hacking charges tied to his role in operating the “Satori” botnet, a crime machine powered by hacked Internet of Things (IoT) devices that was built to conduct massive denial-of-service attacks targeting Internet service providers, online gaming platforms and Web hosting companies.

Kenneth “Nexus-Zeta” Schuchman, in an undated photo.

Kenneth Currin Schuchman pleaded guilty to one count of aiding and abetting computer intrusions. Between July 2017 and October 2018, Schuchman was part of a conspiracy with at least two other unnamed individuals to develop and use Satori in large scale online attacks designed to flood their targets with so much junk Internet traffic that the targets became unreachable by legitimate visitors.

According to his plea agreement, Schuchman — who went by the online aliases “Nexus” and “Nexus-Zeta” — worked with at least two other individuals to build and use the Satori botnet, which harnessed the collective bandwidth of approximately 100,000 hacked IoT devices by exploiting vulnerabilities in various wireless routers, digital video recorders, Internet-connected security cameras, and fiber-optic networking devices.

Satori was originally based on the leaked source code for Mirai, a powerful IoT botnet that first appeared in the summer of 2016 and was responsible for some of the largest denial-of-service attacks ever recorded (including a 620 Gbps attack that took KrebsOnSecurity offline for almost four days).

Throughout 2017 and into 2018, Schuchman worked with his co-conspirators — who used the nicknames “Vamp” and “Drake” — to further develop Satori by identifying and exploiting additional security flaws in other IoT systems.

Schuchman and his accomplices gave new monikers to their IoT botnets with almost each new improvement, rechristening their creations with names including “Okiru,” and “Masuta,” and infecting up to 700,000 compromised systems.

The plea agreement states that the object of the conspiracy was to sell access to their botnets to those who wished to rent them for launching attacks against others, although it’s not clear to what extent Schuchman and his alleged co-conspirators succeeded in this regard.

Even after he was indicted in connection with his activities in August 2018, Schuchman created a new botnet variant while on supervised release. At the time, Schuchman and Drake had something of a falling out, and Schuchman later acknowledged using information gleaned by prosecutors to identify Drake’s home address for the purposes of “swatting” him.

Swatting involves making false reports of a potentially violent incident — usually a phony hostage situation, bomb threat or murder — to prompt a heavily-armed police response to the target’s location. According to his plea agreement, the swatting that Schuchman set in motion in October 2018 resulted in “a substantial law enforcement response at Drake’s residence.” Continue reading →

Spam In your Calendar? Here’s What to Do.

September 3, 2019
52 Comments

Many spam trends are cyclical: Spammers tend to switch tactics when one method of hijacking your time and attention stops working. But periodically they circle back to old tricks, and few spam trends are as perennial as calendar spam, in which invitations to click on dodgy links show up unbidden in your digital calendar application from Apple, Google and Microsoft. Here’s a brief primer on what you can do about it.

Image: Reddit

Over the past few weeks, a good number of readers have written in to say they feared their calendar app or email account was hacked after noticing a spammy event had been added to their calendars.

The truth is, all that a spammer needs to add an unwelcome appointment to your calendar is the email address tied to your calendar account. That’s because the calendar applications from Apple, Google and Microsoft are set by default to accept calendar invites from anyone.

Calendar invites from spammers run the gamut from ads for porn or pharmacy sites, to claims of an unexpected financial windfall or “free” items of value, to outright phishing attacks and malware lures. The important thing is that you don’t click on any links embedded in these appointments. And resist the temptation to respond to such invitations by selecting “yes,” “no,” or “maybe,” as doing so may only serve to guarantee you more calendar spam.

Fortunately, the are a few simple steps you can take that should help minimize this nuisance. To stop events from being automatically added to your Google calendar: Continue reading →