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China's Cyber Espionage Case a Guide to Hacking

Part of the building of 'Unit 61398', a secretive Chinese military unit accused of cyber espionage in Shanghai

Part of the building of 'Unit 61398', a secretive Chinese military unit accused of cyber espionage in Shanghai

The alleged hacking of U.S. corporate computers by elements of China’s military wasn’t in and of itself all that unique.

As cyber attacks go, it was moderately sophisticated in technique.

But that raises a more troubling question.

How could major international corporations — such as U.S. Steel, Alcoa and others with millions of dollars of intellectual property — get robbed by a small, low-cost group of hackers working from China?

The answer: It’s surprising it doesn’t happen more often.

Over its 48 pages and 31 counts of criminal misconduct, the U.S. Justice Department’s indictment details how five Chinese army officers, with Internet identities such as “Ugly Gorilla”, “Kandygoo” and “WinXYHappy,” went about infiltrating computer networks of six large U.S. corporations.

Sections of the indictment are so detailed that they read like a primer, a virtual "how-to manual" for anyone interested in how hackers do what they do.

Social engineering

While some of the terms such as “spearphishing,” “beacon” or “hop-points” may need a little technical explaining, it’s clear from the indictment that the defendants generally employed something security analysts call social engineering.

In essence, social engineering is a tactic where hackers pretend to be somebody else to try and trick the target into trusting them.

The aim is getting them to reveal information directly (such as a password) or infect their computers by clicking on malicious links and attachments. Social engineering, in the end, is just a fancy label for little more than a con job.

There are many different tricks a hacker might employ to earn their target’s trust.

But once they have it, it’s relatively easy to fool unsuspecting targets into releasing sensitive information.

A common example: if someone you believe is a trusted co-worker sends you an email urgently asking for a password they’ve forgotten, you’re probably much more likely to send it to them without thinking twice than someone you don’t know, analysts say.

“Given that these types of attacks can be attempted with very little consequence if they don't succeed,” said Mike Auty, senior security researcher at the firm MWR Infosecurity,

“It allows the attacker to launch a number of attacks, over a long period of time, and the chances are high that there will be a mistake, and someone will grant them access,” he said.

Which, as the indictment details, is what the Chinese are alleged to have done.

One particular social engineering trick allegedly used by the defendants was “spearphishing” — sending links or attachments via email that, if clicked, would infect the target’s computer system without them knowing.

Once infected, the malware would create what’s called a “back door” or secret entrance into the system that could likely go undetected for prolonged periods.

In the recent indictment papers, U.S. prosecutors say that, defendant “SUN” — short for Sun Kailiang — “sent spearphishing e-mails purporting to be from two U.S. Steel e-mail accounts to approximately eight U.S. Steel employees, including U.S. Steel’s Chief Executive Officer.

“The e-mails had the subject line “US Steel Industry Outlook” and contained a link to malware that, once clicked, would surreptitiously install malware on the recipients’ computers, allowing the co-conspirators backdoor access to the company’s computers,” the indictment said.

“ unidentified co-conspirator sent approximately 49 spearphishing e-mails to U.S. Steel employees with the same subject, “US Steel Industry Outlook,” according to the indictment.

But it didn’t stop with basic spearphishing.

Researcher Auty said successful social engineering hacks often require more than just bad emails.

And the indictment lays out another, more sophisticated attack strategy that required much greater planning, research and patience.

Persistence over technology

Throughout the document, the Justice Department describes how the defendants would first try to gain lists of current and former employees at each of the six targeted companies and then went about researching who they were.

The defendants then went about purchasing a variety of web site domain names, such as ‘’ or ‘’ (readers are advised NOT to visit these sites) and populating them both with content that appeared legitimate, but also contained hidden Trojan-horse malware.

These websites both served to create an appearance of trust and also to serve as “hop-points” between the infected computers and the main attack servers in China to coordinate and control all the malware-infected computers in the U.S.

In the indictment, attorneys detail how these hop-points could surreptitiously allow the hackers to grab documents and “exfiltrate” — a computer term that basically means stealing — the data back to China.

As the indictment put it: “Between intrusions, the co-conspirators used the domain accounts to reassign the malicious domain names to non-routable or innocuous IP addresses, (e.g., IP addresses for popular webmail services, like Gmail or Yahoo), which would obscure any beacons their malware sent during that period.”

“Bad guys want my stuff”

Technologically speaking, it wasn’t anywhere near the sophistication of something like the Stuxnet virus.

But for sheer persistence and imagination, it was quite a clever operation.

“People need to realize: the bad guys are persistent, they’re organized,” said Stephen Cobb, a senior security researcher at the cyber security firm ESET North America. “Maybe this would help: it’s not an individual who’s trying to break into your web server every five seconds.”

“Let’s face it: every company today has information on their computers that they need to protect,” Cobb said. “If you’ve got a website, there’s an attempt to break into it every five, six seconds. It’s automated programs.

"So people from all around the world who want to get into somebody else’s computer are running automated script looking for holes," he said. "There’s a constant probing of systems.”

Still, it’s hard for most people to understand cyber security, analysts say.

“If you work for a bank, you should be fairly aware that people might want to rob you, that’s where the money is,” Cobb said. “But if you’re a doctor, or an engineer designing a product, you’re not necessarily thinking ‘there are bad guys who want my stuff.’‘”

But security expert Auty said that’s not a cause to lose hope.

“People will always be a weak element, but given that organizations have learnt to harden their perimeter, the next area of improvement required within the industry is ensuring internal visibility and appropriate segregation,” he said.

For both Auty and Cobb, the segregation of data into specific areas with different levels of security is key.

“You can’t protect what you don’t know about,” Cobb told VOA. “One of the very first things on my list for remediation or security programs for small business or big business is know what you’ve got.”
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    Doug Bernard

    Doug Bernard covers cyber-issues for VOA, focusing on Internet privacy, security and censorship circumvention. Previously he edited VOA’s “Digital Frontiers” blog, produced the “Daily Download” webcast and hosted “Talk to America”, for which he won the International Presenter of the Year award from the Association for International Broadcasting. He began his career at Michigan Public Radio, and has contributed to "The New York Times," the "Christian Science Monitor," SPIN and NPR, among others. You can follow him @dfrontiers.

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