Yahoo! data breaches

July 2016 discovery

Around July 2016, account names and passwords for about 200 million Yahoo! accounts were presented for sale on the darknet market site, "TheRealDeal". The seller, known as "Peace_of_Mind" or simply "Peace", stated in confidential interviews with Vice and Wired, that he had had the data for some time and had been selling it privately since about late 2015. Peace has previously been connected to sales of similar private information data from other hacks including that from the 2012 LinkedIn hack. Peace stated the data likely dates back to 2012, and security experts believed it may have been parts of other data hacks at that time; while some of the sample accounts were still active, they lacked necessary information to fully login properly, reflecting their age. Experts believe that Peace is only a broker of the information that hackers obtain and sell through him. Yahoo! stated they were aware of the data and were evaluating it, cautioning users about the situation but did not reset account passwords at that time.

Late 2014 breach

The first reported data breach in 2016 had taken place sometime in late 2014, according to Yahoo! The hackers had obtained data from over 500 million user accounts, including account names, email addresses, telephone numbers, dates of birth, hashed passwords, and in some cases, encrypted or unencrypted security questions and answers. Security experts noted that the majority of Yahoo!'s passwords used the bcrypt hashing algorithm which is considered difficult to crack, the rest used the older MD5 algorithm which can be broken rather quickly.

Such information, especially security questions and answers, could help hackers break into victims' other online accounts. Computer security experts cautioned that the incident could have far-reaching consequences involving privacy, potentially including finance and banking as well as personal information of people's lives—including information pulled from any other accounts that can be hacked with the gained account data. Experts also noted that there may be millions of people, as users of Flickr, Sky and BT who do not realize that they have a Yahoo! account as a result of past acquisitions and agreements made with Yahoo!. or Yahoo users who stopped using their accounts years earlier.

Yahoo! reported the breach to the public on September 22, 2016. Yahoo! believes the breach was committed by "state-sponsored" hackers, but did not name any country. Yahoo! affirmed the hacker was no longer in their systems and that the company was fully cooperating with law enforcement. The Federal Bureau of Investigation (FBI) confirmed that it was investigating the affair.

In its November 2016 SEC filing, Yahoo! reported they had been aware of an intrusion into their network in 2014, but had not understood the extent of the breach until it began investigation of a separate data breach incident around July 2016. Wired believes this separate data breach involved the Peace data from July 2016. Yahoo!'s previous SEC filing on September 9, prior to the breach announcement, had stated that it was not aware of any "security breaches" or "loss, theft, unauthorized access or acquisition" of user data.

The November 2016 SEC filing noted that the company believed the data breach had been conducted through a cookie-based attack that allowed hackers to authenticate as any other user without their password. Yahoo! and its outside security analysts confirmed this was the method of intrusion in their December 2016 announcement of the August 2013 data breach, and had invalidated all previous cookies to eliminate this route. In a regulatory filing in 2017, Yahoo! reported that 32 million accounts were accessed through this cookie-based attack. Multiple experts believe that the security breach was the largest such incident made public in the history of the Internet at the time.

August 2013 breach

Another data breach occurred on Yahoo! servers in August 2013; Yahoo! stated this was a separate breach from the late 2014 one and was conducted by an "unauthorized third party". Similar data as from the late 2014 breach had been taken from over 1 billion user accounts, including unencrypted security questions and answers. Yahoo! reported the breach on December 14, 2016, and forced all affected users to change passwords, and to reenter any unencrypted security questions and answers to make them encrypted in the future. In February 2017, Yahoo! notified some users that data from the breach and forged cookies could have been used to access these accounts. This breach is now considered the largest known breach of its kind on the Internet.

Yahoo! stated that this new breach was discovered while it was reviewing data given to them from law enforcement from an unnamed third-party hacker about a month prior. They had been able to identify the method that data was taken from the last 2014 hack using fake cookies during this investigation, but the method of the August 2013 breach was not clear to them upon their announcement. Andrew Komarov, chief intelligence officer of the cybersecurity firm InfoArmor, had been helping Yahoo! and law enforcement already in response to the Peace data. In trying to track down the source of Peace's data, he discovered evidence of this latest breach from a darkweb seller offering a list of more than one billion Yahoo! accounts for about $300,000 in August 2015. While two of the three buyers of this data were found to be underground spammers, the third buyer had specifically asked the seller of the Yahoo! data to affirm if ten names of United States and foreign government officials were on the offered list and information associated with them. Suspecting that this buyer may have been related to a foreign intelligence agency, Komarov discovered that the offered data included the accounts of over 150,000 names of people working for the United States government and military, as well as additional accounts associated with European Union, Canadian, British, and Australian governments. Komarov alerted the appropriate agencies about this new data set and began working with them directly. Komarov noted that while U.S. government policies have changed to keep key intelligence employees as low-key as possible, these affected users likely set up Yahoo! accounts for personal use well before such policies were in place, and included their work details as part of their profiles, making this information highly valuable for foreign intelligence groups. Komarov had opted not to go to Yahoo! about the data, as they had previously been dismissive of InfoArmor's services in the past, and Komarov believed that Yahoo! would not thoroughly investigate the situation as it would threaten their Verizon buyout.

In addition to government issues, Komarov and other security firms warned that the data from this breach can be used to attempt access to other accounts, since it included backup email contact addresses and security questions. Such data, these experts warn, could be used to create phishing attacks to lure users into revealing sensitive information which can then be used for malicious purposes. Hold Security, another cybersecurity firm, observed that some darkweb sellers were still selling this database for up to $200,000 as late as October 2016; Komarov found that the data continues to be available at a much lower price since the passwords have been forced changed, but the data can still be valuable for phishing attacks and gaining access to other accounts.

Attribution and motivation

According to Yahoo, the 2014 breach was carried out by a "state-sponsored actor" and the organization claims that such "intrusions and thefts by state-sponsored actors have become increasingly common across the technology industry". While Yahoo did not name any country, some suspect China or Russia to be behind the hack.

U.S. intelligence officials, who declined to give their names to the media, highlighted similarities between the attack and previous breaches linked to the Russian government. Yahoo in fall 2014 detected what it believed was a small breach "involving 30 to 40 accounts", carried out by hackers believed to be "working on behalf of the Russian government" - according to Yahoo executives because it was launched from computers in that country. Yahoo reported the incident to the FBI in late 2014 and notified affected users.

Sean Sullivan, a security adviser at cyber security firm F-Secure Labs, declared China to be his top suspect and said that "there have been no past cases of a service provider like Yahoo being targeted [by Russia]," whose hackers tend to perpetrate targeted attacks, either in areas important for their economy, such as the energy sector, or to undermine politicians, while "China likes to vacuum up all kinds of information" and "has a voracious appetite for personal information". Examples of state-sponsored data breaches with China in suspicion include the massive data breach of 18 million people from the United States Office of Personnel Management and the attacks on Google in 2010, dubbed Operation Aurora.

Others expressed doubt about Yahoo's claim of the attack being state-sponsored, as it would be less embarrassing for Yahoo to attribute an attack to a nation state, which typically have the most sophisticated hacking capabilities, than to attribute it to a cybercriminal group or individual—particularly as Yahoo is in the middle of being acquired by Verizon. Senior research scientist Kenneth Geers from Comodo, however, noted that "Yahoo is a strategic player on the World Wide Web, which makes it a good—and valid—target for nation-state intelligence collection". One of the effects, if not the direct goal, of the breaches was the use of the stolen usernames and passwords for credential stuffing attacks.

InfoArmor issued a report that challenged Yahoo's claim that a nation-state orchestrated the heist after reviewing a small sample of compromised accounts. InfoArmor had been able to obtain the list of affected accounts for analysis. InfoArmor determined that the breach was likely the work of an Eastern European criminal gang that later sold the entire hacked database to at least three clients, including one state-sponsored group. According to InfoArmor, by early 2015, the group no longer offered to sell the full database, but sought "to extract something from the dump for significant amounts of money." The report noted that it was difficult to determine who the ultimate mastermind of a hack might be, as criminal hackers sometimes provide information to government intelligence agencies or offer their services for hire. Komarov said the hackers may be related to Group E, who have had a track record of selling stolen personal data on the dark web primarily to underground spammers, and were previously linked to breaches at LinkedIn, Tumblr, and MySpace. InfoArmor had linked Group E as the source of the data that was offered by Peace, and believed that Group E was brokering the data to darkweb sellers. While InfoArmor did not believe a state-sponsored agency committed the breach, they warned of implications on foreign intelligences, as the breaches "opens the door to significant opportunities for cyber-espionage and targeted attacks," and may be the key in several targeted attacks against U.S. government personnel, which resulted after the disclosed contacts of the affected high-level officials of intelligence community in October 2015.

Yahoo! stated that the 2013 breach is connected "to the same state-sponsored actor believed to be responsible for the data theft the company disclosed on September 22, 2016." White House spokespersons stated that the FBI is currently investigating this breach, though the scope of its impact is unclear. A United States official, speaking to CBS News, says that government investigators agree with Yahoo! that the hack was sponsored by a foreign state, possibly Russia. Security experts speculate that because little of the data from this 2013 breach have been made available on the black market, the breach was likely targeted to find information on specific people.

Prosecution

On March 15, 2017, the FBI officially charged the 2014 breach to four men, including two that work for Russia's Federal Security Service (FSB). In its statement, the FBI said "The criminal conduct at issue, carried out and otherwise facilitated by officers from an FSB unit that serves as the FBI’s point of contact in Moscow on cybercrime matters, is beyond the pale."

Yahoo!

Yahoo! delay in discovering and reporting these breaches, as well as implementing improved security features, has become a point of criticism. Yahoo! has been taken to task for having a seemingly lax attitude towards security: the company reportedly does not implement new security features as fast as other Internet companies, and after Yahoo! was identified by Edward Snowden as a frequent target for state-sponsored hackers in 2013, it took the company a full year before hiring a dedicated chief information security officer, Alex Stamos. While Stamos' hiring was praised by technology experts as showing Yahoo!'s commitment towards better security, Yahoo! CEO Marissa Mayer had reportedly denied Stamos and his security team sufficient funds to implement recommended stronger security measures, and he departed the company by 2015. Experts have pointed out that Yahoo!, only until the most recent breaches, had not forced affected users to change their passwords, a move that Mayer and her team believed would drive users away from the service. Some experts stated that implementing stronger security measures does take monetary resources, and Yahoo!'s financial situation has not allowed the company to invest in cybersecurity.

Yahoo!'s internal review of the situation found that Mayer and other key executives knew of the intrusions but failed to inform the company or take steps to prevent further breaches. The review led to the resignation of the company's principle lawyer, Ronald S. Bell by March 2017, and Mayer's equity compensation bonus for 2016 and 2017 were pulled.

Verizon Communications merger deal

In July 2016, prior to the announcement of the breaches Verizon Communications had entered into negotiations and approval to purchase Yahoo! for $4.8 billion, with the deal set to close in March 2017. Verizon had only become aware of the 2014 breach just two days prior to the Yahoo! September announcement. Verizon Communications Inc. Chief Executive Lowell McAdam said he wasn't shocked by the hack, saying "we all live in an internet world, it's not a question of if you're going to get hacked but when you are going to get hacked". He left the door open to possibly renegotiate the $4.83 billion price tag. Craig Silliman, Verizon's general counsel told reporters in Washington Verizon has "a reasonable basis to believe right now that the impact is material" and that they're "looking to Yahoo to demonstrate [...] the full impact". The company's reputation has suffered online in the last few months, according to an analysis by marketing firm Spredfast: about 90 percent of the Twitter comments about Yahoo were negative in October, up from 68 percent in August, before news of the hack. Following the announcement of the August 2013 breach, Verizon was reportedly seeking to change terms of the deal to reflect on the impact of these breaches, including lowering their offer or potentially seeking court action as to terminate the deal. Verizon stated that they will "review the impact of this new development before reaching any final conclusions". In February 2017, Verizon and Yahoo! announced that the deal will still go forward, but dropping the sale price by $350 million, down to $4.48 billion. Verizon and Yahoo! will share jointly in the ongoing costs for the government investigation of the breaches under this new term, which is expected to close by the second quarter of 2017.

United States

Members of the U.S. Government have been critical of Yahoo!'s reactions to these breaches. In a letter to Yahoo CEO Marissa Mayer, six Democratic U.S. Senators (Elizabeth Warren, Patrick Leahy, Al Franken, Richard Blumenthal, Ron Wyden and Edward Markey) demanded answers on when Yahoo discovered the last 2014 breach, and why it took so long to disclose it to the public, calling the time lag between the security breach and its disclosure 'unacceptable'. On September 26, 2016 democratic senator Mark Warner asked the U.S. Securities and Exchange Commission (SEC) to investigate whether Yahoo and its senior executives fulfilled their obligations under federal securities laws to properly disclose the attack. In his letter, Warner also asked the SEC to evaluate whether the current disclosure regime was adequate. Jacob Olcott, who helped develop the SEC data breach disclosure rules and former Senate Commerce Committee counsel, noted that due to the size of the breach, intense public scrutiny and uncertainty over the timing of Yahoo's discovery, the hack could become a test case of the SEC's guidelines. Following the announcement of the August 2013 breach, Sen. Warner called for a full investigation of the situation, asking "why its cyber defenses have been so weak as to have compromised over a billion users".

By November 9, 2016, it was reported that 23 lawsuits related to the late 2014 breach had been filed against Yahoo! so far. In one lawsuit, filed in the U.S. District Court for the Southern District of California in San Diego, the plaintiffs contend that the hack caused an "intrusion into personal financial matters." In another lawsuit, filed in the U.S. District Court for the Northern District of California in San Jose, the plaintiff contends that Yahoo acted with gross negligence in dealing with and reporting the security breach. Yahoo declined to comment on ongoing litigation. Five of these 23 cases were combined into a single suit in early December 2016 to be heard in San Jose in March 2017. Following the December 14 announcement of the August 2013 hacks, another class-action lawsuit was filed against Yahoo! in New York state on behalf of all affected United States residents, stating that "Yahoo failed, and continues to fail, to provide adequate protection of its users’ personal and confidential information."

International

Foreign governments have also expressed concern on these breaches. On October 28, the European privacy regulators "Article 29 Working Party" outlined concerns about the 2014 data breach as well as allegations that the company built a system that scanned customers' incoming emails at the request of U.S. intelligence services in a letter to Yahoo. They asked Yahoo to communicate all aspects of the data breach to the EU authorities, to notify the affected users of the "adverse effects" and to cooperate with all "upcoming national data protection authorities' enquiries and/or investigations". In late November, Ireland's Data Protection Commissioner (DPC), the lead European regulator on privacy issues for Yahoo whose European headquarters are in Dublin, said that it had stepped up its examination of the breach, that it was awaiting information from Yahoo on allegations that it helped the U.S. government scan users' emails, and that Yahoo was not investigating the breach but just examining it. Germany's Federal Office for Information Security criticized Yahoo! following the December 2016 announcement, stating "security is not a foreign concept", and warned government and other German users to seek email and Internet solutions from companies with better security approaches.