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UPDATE: Adobe & IE Implicated as China’s Spy Holes
It appears the hackers used the same conduit to tunnel into another 30 odd companies

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[UPDATE: Since this story was published at 12:45AM on January 15, the source quoted by the author - iDefense - has in fact retracted its initial assessment
by providing the following statement: "In iDefense's press announcement regarding the recently discovered Silicon Valley compromises, we stated that the attack vector was likely "malicious PDF file attachments delivered via email" and suggested that a vulnerability in Adobe Reader appeared to have been exploited in these attacks. Upon further review, we are retracting our initial assessment regarding the likely use of Adobe vulnerabilities. There are currently no confirmed instances of a vulnerability in Adobe technologies being used in these attacks. We continue to investigate this issue."
--SYS-CON.com Editorial Team]

A zero-day Acrobat security hole in the buggy Adobe Reader, software that's on practically every PC in the world, may be how Chinese hackers pulled off the cyber-attack on Google that has Google threatening to pull out of China, the world's largest Internet market, according to iDefense, the VeriSign managed security unit.

McAfee, on the other hand, claims a vulnerability in Internet Explorer let the rogues in and absolved Adobe.

CTO George Kurtz says on McAfee's web site that McAfee told Microsoft about the undisclosed flaw in its browser and that it's working with companies hit by the attack, dubbed Project Aurora, as well as the government and law enforcement.

Microsoft, in response, initially said, "We recently became aware that a vulnerability in Internet Explorer appears to be one of several attack mechanisms that were used in highly sophisticated and targeted attack against several companies. Our teams are currently working to develop an update and we will take appropriate actions to protect our customers." It then admitted its compromised widgetry played a role and issued an update. It said using IE in protected mode with security settings at high would limit one's exposure.

The Adobe vulnerability discovered last month was apparently just fixed. Adobe reportedly had the patch but didn't want to upset its normal update schedule.

Like Google Adobe reports being attacked. Like Google it termed the intrusion "sophisticated" evidently because of the employees targeted.

On its blog Tuesday the company said, "Adobe became aware on January 2, 2010 of a computer security incident involving a sophisticated, coordinated attack against corporate network systems managed by Adobe and other companies. We are currently in contact with other companies and are investigating the incident. At this time, we have no evidence to indicate that any sensitive information - including customer, financial, employee or any other sensitive data - has been compromised. We anticipate the full investigation will take quite some time to complete. We have and will continue to use information gained from this attack to make infrastructure improvements to enhance security for Adobe, our customers and our partners."

Adobe sequentially confirmed that the attack it experienced appears connected to the attack on Google. Unlike Adobe, Google said Tuesday that the attack on its corporate infrastructure last month netted the hacker some unidentified intellectual property. The Gmail hack of human rights activists it also complained of is a separate issue.

It appears the hackers used the same conduit to tunnel into another 30 odd companies, more than the 20 Google mentioned in its disclosure and some of them iDefense clients. Once inside they inserted a Trojan horse into the machines they breached and created a backdoor in the system where they could scoop out information.

And it was all done by e-mail. The hackers sent targeted e-mail containing a corrupt PDF file to employees with administrative access to the systems containing IP. When opened, it released the Trojan that ransacked the companies' victimized servers for their booty.

iDefense thinks the hackers were after and in many cases got proprietary source code from the tech, defense and financial companies they targeted.

Apparently the same servers were involved in all the attacks and their IP addresses track back to a XEN VPS hosting company in New Jersey called Linode. The stolen code was then stored on servers at Rackspace, another hoster which says it's been assisting in the investigation. The command-and-control servers are somewhere in Taiwan.

According to iDefense, "Two independent, anonymous iDefense sources in the defense contracting and intelligence consulting community confirmed that both the source IPs and drop server of the attack correspond to a single foreign entity consisting either of agents of the Chinese state or proxies thereof."

iDefense says the attack bears fingerprints similar to another attack on 100 tech companies last July and that the targets could have been compromised since then.

An unidentified source close to the investigation told the Dark Reading blog that "this brand of targeted attack has actually been going on for about three years against U.S. companies and government agencies, involving some 10 different groups in China consisting of some 150,000 trained cyber-attackers."

Ironically the Chinese government has repeatedly fretted about there being backdoors in Microsoft software.

About Maureen O'Gara
Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

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