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Yahoo

500 million Yahoo accounts breached

Mike Snider, and Elizabeth Weise
USA TODAY
One-time Internet pioneer Yahoo was recently the focus of a bidding war for its core assets, which were scooped up by AOL owner Verizon.

SAN FRANCISCO — Information from at least 500 million Yahoo accounts was stolen from the company in 2014, the company said Thursday, indicating it believes a state-sponsored actor was behind the hack.

The theft may have included names, email addresses, telephone numbers, dates of birth, and in some cases, encrypted or unencrypted security questions and answers, Yahoo said.

Even in an Internet-dependent population accustomed to the regular occurrence of massive data breaches, the size of this one —  thought to be the largest ever in terms of user accounts — is attention-grabbing. And the possibility that another country could be behind the attack adds to the shock factor.

Yahoo may be the biggest data breach

The FBI said it was aware of the intrusion and is investigating the matter but did not give any information about whether it had specific insight into who might have been behind the attack.

"We take these types of breaches very seriously and will determine how this occurred and who is responsible," the agency said in an emailed statement Thursday.

Claims surfaced in early August that a hacker using the name "Peace" was trying to sell personal information of Yahoo account users on the dark web — a black market of thousands of secret websites.

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Yahoo, which says about 1 billion people globally engage with one of its properties each month, said it was notifying potentially affected users and taking steps to secure their accounts, such as invalidating unencrypted security questions and answers. Users who haven't changed their passwords since 2014 should do so, it said.

About 250 million use Yahoo Mail, while another 81 million use Yahoo Finance and tens of millions use Yahoo Fantasy Sports.

The Sunnyvale, Calif. company is also reaching out to users of Flickr, the 113-million-user photo-sharing service whose accounts may have been linked to their Yahoo IDs.  No accounts on Yahoo-owned blogging site Tumblr should be affected.

Verizon sale in progress

The announcement comes at an awkward time for Yahoo. Pressured by investor activists disgruntled by stagnating growth under CEO Marissa Mayer, the company engaged in a multi-month sales process, culminating in a July deal to sell its core Internet business to media giant Verizon Communications. The $4.8 billion deal is expected to close in the first quarter of next year.

Verizon said it was notified of the Yahoo breach "within the last two days." "We understand that Yahoo is conducting an active investigation of this matter, but we otherwise have limited information and understanding of the impact," Verizon said.

Given the unsettled nature of Yahoo's ownership just now, “regulators should be concerned with who will take responsibility for the response to this compromise. It can be easy for the ‘right thing to do’ to slip through the cracks in a multi-billion dollar transition," said Tim Erlin, senior director of IT security and risk strategy at Tripwire, a computer security firm.

The breach doesn't threaten Verizon's acquisition of Yahoo, says Robert Peck, Internet equity analyst with SunTrust Robinson Humphreys. But the investigation will likely lead to findings that perhaps 5% of users have left Yahoo and that could yield a lower price for Verizon.

Should the result be that Yahoo has has perhaps 5 million to 10 million fewer users than when the transaction was announced in July, "this could affect the Verizon purchase price from around $100 million to $200 million," Peck said.

Yahoo's has pledged to stay on with the company through the close of the merger, which is being overseen by Verizon's Marni Walden and AOL CEO Tim Armstrong. Yahoo shares (YHOO) were flat Thursday. Verizon (VZ) shares were up 0.9% at $52.35.

Credential stuffing

Most consumers might not think there’s much in their Yahoo account that would be of use to hackers, which typically might only include their email and Yahoo password. However, those two bits of information offer multiple uses for ingenious hackers bent on extracting the maximum value from information, say experts.

According to a Gartner survey, 50% of users reuse their passwords across multiple platforms. So armed with an email address and Yahoo password, hackers might be able to gain access to multiple accounts.

The technique is called “credential stuffing” and it’s become epidemic over the last year and a half, said Avivah Litan, a vice president and analyst at Gartner Research.

“The bad guys get lists of user IDs and password and then test them, they run through them at all the sites they want to attack to see where they work,” she says.

Once hackers gain access to other accounts, they are able to assemble dossiers on individuals. These are called “fullz” and include as much information as the hacking group has about a person, assembled from multiple sources over time. Typically they contain the person’s name, Social Security number, birth date, address, birthday, account numbers and other data.

"There are fullz available probably for most of the U.S. population,” said Litan.

The attackers don’t only use that information to go after bank accounts and credit cards, but also less obvious and harder to track information that is still worth money on the black market.

That can include loyalty points at hotel chains and airlines, avatars and points from online games, even stored value in coffee cards. Once accessed, all of these can be siphoned off, bundled and then resold.

“They’ve gone low, slow and distributed. You used to be able to see these attacks coming through really quickly after a breach,” said Litan. Instead organized crime groups take their time, harvesting points and value.

“It’s very lucrative,” said Litan.

Contributing: Kevin Johnson in Washington and Kim Hjelmgaard in Berlin.

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