Bloomberg News

Stolen Credit Cards Go for $3.50 at Amazon-like Online Bazaar

December 28, 2011

Dec. 20 (Bloomberg) -- In mid-September, a European hacker nicknamed Poxxie broke into the computer network of a U.S. company and, he said, grabbed 1,400 credit-card numbers, the account holders’ names and addresses, and the security code that comes with each card.

With little trouble, he sold the numbers for $3.50 each on his own seller’s site, called CVV2s.in, to underworld buyers who have come to trust the quality of his goods, he said.

“The main thing in any business is honesty,” Poxxie said, without any trace of irony.

The Traverse City, Michigan-based Ponemon Institute, which researches data security, estimates that thieves annually steal 8.4 million credit-card numbers in the U.S. alone. How do cyberbandits, who have turned hacking into a volume business, unload all those numbers. A lot like Amazon.com, it turns out.

Customers on CVV2s can search for card numbers by bank, card type, credit limit and zip code, loading them into a virtual shopping basket as they go. The site offers the ability to search by bank identification number. That means customers can choose cards by institutions known to have weak security, Poxxie said. CVV2s even has an automated feature that lets clients validate the numbers in real time, to make sure the bank hasn’t canceled the card.

Sites like Poxxie’s make up the cyberunderworld’s version of a pirate’s cove, offering their online booty at cut-rate prices. Hundreds of millions of dollars in stolen data are bought and sold in underground’s chat rooms and forums every year, a fencing operation that becomes more robust annually, according to RSA, the security division of EMC Corp. CrackHackForum.com, one of the sites, even mimics EBay Inc., rating buyers and sellers with starred reviews.

$114 Billion a Year

Symantec Corp., the cybersecurity firm, estimates that cyberthieves steal data worth $114 billion a year. By comparison, the Federal Bureau of Investigation said the take from all bank robberies in the U.S. in 2010 was just $43 million. The global market in cocaine is an estimated $85 billion, according to the United Nations.

“The problem is getting worse faster than we’re getting better,” said Tony Sager, chief operating officer of the Information Assurance Directorate at the National Security Agency, which includes some of the U.S. government’s best cyberexperts. “We’re not keeping pace.”

To look inside the cyberbazaar, to find details on prices and goods for sale, Bloomberg News gathered information through publicly available websites and in restricted forums, aided in this search by cybersecurity experts. Some of the information was provided through online interviews with participants, who protected their real identities as they discussed details on their lives and criminal operations.

How to Verify

The cyberunderground thrives because of anonymity: Hackers can devise any persona to conduct business and use a variety of technical tricks to hide their tracks. Their stories were verified to the extent possible by security experts who have watched the careers and methods of specific hackers for years.

As recently as 2008, the fight between those who protect computer networks and those who attack them was about evenly matched. That’s no longer the case, according to the cybercops. The defenders are losing the battle because of a combination of their opponents’ technical achievements and rapid advances in a global supply chain of theft.

In 2009, Symantec cataloged 2.8 million new viruses infecting computers. A year later, that number had jumped to 286 million. One reason for the hundredfold growth is that sophisticated viruses now change their digital signatures as they infect new machines. Because anti-virus software uses a catalog of known signatures to stop infections, the dominant cybersecurity technology in many cases is useless as a result.

Cheap Malware

Some of the market’s most advanced malware -- stealth software that steals data or lets hackers take remote command of a computer -- can be bought for a few thousand dollars. Sophisticated spam operations implant the malware in computers for pennies per victim.

Black-market vendors test malware against the latest anti- virus programs; provide hosting for command-and-control servers in countries that can’t be touched by U.S. law enforcement; or start a directed denial-of-service attack on a commercial or other website priced by the number of hours the site is down.

One enterprise, advertised recently on the Israeli forum SecondZion, has created a language-aid call center for hackers who need to pose as U.S. bank customers or communicate with a German-speaking money mule, as currency transporters are called. The hackers provide a script; operators do the rest. “Good afternoon, ladies and gentleman crooks,” the site says, noting that its translators are “all operators with extensive experience.” Two users followed up with comments praising the service as excellent.

Illicit Chat Rooms

Distribution of goods and services is organized through thousands of illicit chat rooms and invitation-only forums. Some are publicly accessible: Any beginner looking to learn the basics of a so-called SQL injection hack -- a basic attack on the security of a website -- can join a forum like OpenSC and ask for tips. Others are private and access is strictly protected.

The most serious criminals congregate on forums such as Maza. Membership to the forum is granted only by a vote of all of its senior members and only after an eight-day waiting period, according to researchers who have tried to infiltrate it. Most deals done on the forum are large, so members use an escrow system. Cash or goods are held either by a trusted senior hacker or one who has retired from the business. In a criminal world in which conspirators almost never meet and trust is in short supply, the escrow system has evolved as a way for elite hackers to do big business.

‘Five Figures’

“Most of the transactions of in those forums will be in the five figures,” said a security investigator who has infiltrated several such forums. “The escrow system is the only way to make those transactions viable.”

Public hacker sites, including CrackHackForum and HackForums, usually have rules against selling stolen data. Enforcement of sales postings is often weak and varies widely.

Poxxie’s site, which is well known to security experts, was run until recently from a server in India, where U.S. law enforcement carries little weight with local authorities when it comes to computer crime. The site was recently moved or shut down, a common security practice among hackers.

Poxxie has been in business long enough to see the price for a stolen credit card plummet because of over-supply and more sophisticated safety precautions by banks. Why charge $3.50 for a stolen card number with the purchasing power to buy a car? The card could be canceled at any time after purchase, he said, and there are inherent risks in using it.

Crime Wave

“In this whole carding scene, nothing is guaranteed,” Poxxie said via ICQ, the online messaging network that is a common platform for doing business in the cyberunderground.

Poxxie’s business is a boutique firm in an industrial-scale crime wave. Although the targets of cybercrime are still concentrated in the U.S. and Europe, the perpetrators are global. Some are independent operators who make a few thousand dollars a month, often supplementing their income with a day job. Others are members of large criminal organizations.

Hex Nightmare falls somewhere in between. When you conduct business with the 20-something cyberthief, the first -- and only -- thing you see is an avatar on ICQ: an anime version of a girl in hip huggers and a tank top. A person who has tracked her over several years said Hex Nightmare has managed to gain an impressive pedigree in the cyberunderground, learning quickly and moving in some of the most trusted circles of top cyberthieves.

Take-Home Pay

Her take-home from cybertheft, which concentrates mostly on stealing credit-card numbers and online banking credentials, compares with the pay of some lower-level corporate executives, she said via ICQ -- keeping her true identity secret. “I can possibly make an extra $8k a month on top of my regular income,” she said.

To the young hacker, cybertheft is like a second job, one she juggles, she said, with going out to clubs on weekend nights and waitressing during the week. Her legitimate job is also a way to launder illicit income, she said. Hex Nightmare said she didn’t want the debt of a university education and instead spent two years on the forums learning her trade. The hacker faces none of violence associated with other organized crime and otherwise leads a relatively normal life.

“They have no idea what I do,” she said of friends and acquaintances. The details of the cyberthief’s personal life -- including her real gender and age -- couldn’t be verified but her business model and activities were corroborated by a security professional and fit the profile typical of young hackers, according to Eric Strom, an FBI special agent who heads an elite cyber team based in Pittsburgh.

Like Universities

“These are marketplaces, but they are also like universities,” Strom said. “You have newbies on there, you have seasoned guys. It’s a meeting place, it’s a social networking place, everything wrapped into one.”

Working out of an office in a tech hub along the Monongahela River, Strom wears short-sleeves and loose pants, the uniform of a man who fights crime at a computer keyboard. His unit has a storied place in that world. It was behind DarkMarket, an elite English-language hackers forum that turned out to be an FBI sting when 56 of its members were arrested in 2008.

Before turning to the cyber world, Strom spent most of his FBI career fighting the Mafia. It’s was good training, he said.

Like the Mob

“The stance we take is looking at it through the lens of organized crime,” he said. It took the better part of the 1980s and early 1990s for federal authorities to understand and begin to dismantle the U.S. mafia: develop investigative capacity, penetrate complex enterprises, pass new laws. It will take time with global cybercrime as well, Strom said.

“We’re trying to keep pace with how the crime is evolving,” he said.

Facing sophisticated cartels, the FBI and European law enforcement officials have created new cybersquads and launched major investigations. In October 2010, the FBI began one of its most ambitious cybercrime operations. Code-named Trident Breach, authorities broke up an international crime ring responsible for stealing $70 million from online bank accounts of small businesses and local government throughout the U.S. and Europe. There were arrests in four countries, including 39 in the U.S.

Frustrations

That success was accompanied by frustrations faced daily by investigators: There is almost no chance the world’s top cybercriminals -- residing in safe-haven countries like Belarus, Romania, and Ukraine -- will ever be brought to justice. Most of the individuals detained last year were international students who, acting as so-called mules, withdrew money from the hackers’ U.S. bank accounts and forwarded it home. Five people who were described as kingpins were detained for questioning in Ukraine. All five were eventually set free without seeing the inside of a courtroom, the FBI said in September.

“Cybergangs, mainly in Eastern Europe and the former Soviet Union, are making money that rivals some drug cartels,” said Richard Clarke, former special adviser on cybersecurity to U.S. President George W. Bush, at an October conference on network security. “There is frankly nothing the FBI and Secret Service can do about it.”

In April, the Department of Justice dismantled one of the largest known criminal botnets, a network of infected computers programmed to send data automatically from their hard drives to a server controlled by hackers. The department declared the break-up of Coreflood, as the botnet was known, a major victory.

The Russians

It said almost nothing about the criminals who ran it. Researchers at Dell SecureWorks, the Atlanta-based security firm that aided the investigation, said the kingpins behind Coreflood are three Russians last known to be living comfortably in Rostov, a mid-size city on the Don River.

“Our relationship with the Russians is always a work in progress,” Strom said.

No one personifies Russia’s place at the top of the cyber underworld more than Gribo-demon, a Russian programmer, around 30 years old, U.S. investigators estimate. He is one of the few cybercriminals who is the focus of a his own FBI special operation. Gribo-demon is the author of SpyEye, a sophisticated malware package first released in late 2009 and upgraded several times since then.

Once downloaded on a machine, the malware can be used by hackers to take remote command of key functions. Using SpyEye, a cyberthief can hijack an online banking session in real time, transfer funds to accounts they or their mules control, and adjust the balance displayed so nothing seems amiss.

Seems Legit

The transaction looks legitimate because, in computer terms, it is. All the bank can tell is that it was made from their customer’s computer, using their correct password. A basic version of SpyEye costs around $2,000, according to the hacker sites.

“SpyEye provides military-grade intrusion capabilities for the price of a TV,” said Gunter Ollmann, vice president of research at Damballa Inc., the Atlanta-based security firm that tracks major cyberthreats.

Gribo-demon’s real innovation stems from what he didn’t do: keep SpyEye to himself. Hackers used to write their own code. Good tools were trade secrets. Gribo-demon instead licenses SpyEye, mimicking Microsoft and Oracle, a business model that arguably opened cybercrime to the masses.

The model was pioneered by a competitor and fellow Russian who created popular malware called ZeuS, according to security experts. ZeuS first appeared in 2008. Both programmers provided clients with customer service, offering an array of enticing modules to add functionality for an additional price.

Beta Testing

The ZeuS author, known as Slavik, even Beta-tested new versions with elite users, according to Don Jackson, a SecureWorks researcher. Slavik disappeared in late 2010, but not before he handed the ZeuS source-code to Gribo, who incorporated some of its features into his own product, Jackson said.

Security experts say it’s hard to overestimate impact of Slavik’s and Gribo-demon’s handiwork. In September, the Tokyo- based cybersecurity firm Trend Micro publicized a dossier on a 20-something Russian cyberthief who goes by the name Soldier, tracing his activities in the underground forums over several months. Using SpyEye, soldier stole $3.2 million from U.S. customers of three banks in just six months -- about $17,000 a day -- Trend Micro said.

Going Price

The hacker used bank-account information scraped from more than 25,000 victims’ computers, in some cases renting other cyberthieves’ networks of infected computers. He created counterfeit checks with banking data and mailed them to money mules throughout the United States. They cashed them, then forwarded the funds untraceably to Russia. He even used stolen credit card numbers vacuumed from the victims’ hard drives to buy pre-paid postal-service labels for the packages.

“From start to finish, this guy leveraged every bit of data,” said Alex Cox, an investigator for Netwitness, a cybersecurity division of EMC Corp., which has also been tracking Soldier’s activities.

The most remarkable thing about the theft -- and this is, to experts in the field, the most worrisome development of the past few months -- was that Soldier didn’t need any special expertise with computers. All he needed was a shopping list.

“He’s not a lone hacker,” said Trend Micro’s David Perry. “He didn’t write any code.”

Shopping List

Strom said the FBI is also tracking Soldier and is confident they’ll get him. “These guys are very sophisticated, but often times they slip up,” Strom said.

Strom and other investigators have one significant advantage: the hackers have a habit of turning their skills on one another. The FBI’s DarkMarket sting started with a hacker war between a hacker, calling himself Iceman, who ran CardersMarket, and JiLsi, the DarkMarket administrator, whose real name was Renukanth Subramaniam, the FBI said.

“We took advantage of that animosity,” Strom said, eventually persuading JiLsi to turn over the site to the FBI and giving the bureau control over all communications involving DarkMarket’s 2,500 members. As a result, Subramaniam was sentenced to more than four years in prison in the U.K.

Maza, the elite Russian forum, was recently hacked and its database dumped online. It presented a priceless opportunity for law enforcement. The forum’s database held membership lists, e- mail addresses, IP addresses, and passwords -- the kind of information the world’s top cyber thieves try very hard to keep secret. The main suspect in the Maza attack is the administrator of a rival site, Hex Nightmare said.

Learned a Lot

“We learned a lot of lessons with DarkMarket, and we’ve passed that experience on not only to other offices within the FBI but to our counterparts overseas,” Strom said. “We’re definitely taking the fight back to them.”

Hex Nightmare agrees the FBI may eventually make more progress. When Slavik, the author of the ZeuS malware, disappeared in 2010, he was at the height of his fame. Theories about his disappearance abound on the underground: Slavik was killed; he now works as a cyberspy for the Russian government. Hex Nightmare has her own: “I think Slavik thought it was a good time to get out.”

--Editors: John Brecher, Patrick Oster

To contact the reporter on this story: Michael Riley in Washington at michaelriley@bloomberg.net;

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.


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