Microsoft on Friday said a validation error in its source code allowed for Azure Active Directory (Azure AD) tokens to be forged by a malicious actor known as Storm-0558 using a Microsoft account (MSA) consumer signing key to breach two dozen organizations.
"Storm-0558 acquired an inactive MSA consumer signing key and used it to forge authentication tokens for Azure AD enterprise and MSA consumer to access OWA and Outlook.com," the tech giant said in a deeper analysis of the campaign. "The method by which the actor acquired the key is a matter of ongoing investigation."
"Though the key was intended only for MSA accounts, a validation issue allowed this key to be trusted for signing Azure AD tokens. This issue has been corrected."
It's not immediately clear if the token validation issue was exploited as a "zero-day vulnerability" or if Microsoft was already aware of the problem before it came under in-the-wild abuse.
The attacks singled out approximately 25 organizations, including government entities and associated consumer accounts, to gain unauthorized email access and exfiltrate mailbox data. No other environment is said to have been impacted.
The company was tipped off about the incident after the U.S. State Department detected anomalous email activity related to Exchange Online data access. Storm-0558 is suspected to be a China-based threat actor conducting malicious cyber activities that are consistent with espionage, although China has refuted the allegations.
Primary targets of the hacking crew include U.S. and European diplomatic, economic, and legislative governing bodies, and individuals connected to Taiwan and Uyghur geopolitical interests, as well as media companies, think tanks, and telecommunications equipment and service providers.
It's said to have been active since at least August 2021, orchestrating credential harvesting, phishing campaigns, and OAuth token attacks aimed at Microsoft accounts to pursue its goals.
"Storm-0558 operates with a high degree of technical tradecraft and operational security," Microsoft said, describing it as technically adept, well-resourced, and having an acute understanding of various authentication techniques and applications.
"The actors are keenly aware of the target's environment, logging policies, authentication requirements, policies, and procedures."
Initial access to target networks is realized through phishing and exploitation of security flaws in public-facing applications, leading to the deployment of the China Chopper web shell for backdoor access and a tool called Cigril to facilitate credential theft.
Also employed by Storm-0558 are PowerShell and Python scripts to extract email data such as attachments, folder information, and entire conversations using Outlook Web Access (OWA) API calls.
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Microsoft said since the discovery of the campaign on June 16, 2023, it has "identified the root cause, established durable tracking of the campaign, disrupted malicious activities, hardened the environment, notified every impacted customer, and coordinated with multiple government entities." It also noted it mitigated the issue "on customers' behalf" effective June 26, 2023.
The exact scope of the breach remains unclear, but it's the latest example of a China-based threat actor conducting cyberattacks seeking sensitive information and pulling off a stealthy intelligence coup without attracting any attention for at least a month before it was uncovered in June 2023.
The disclosure comes as Microsoft has faced criticism for its handling of the hack and for gating forensic capabilities behind additional licensing barriers, thereby preventing customers from accessing detailed audit logs that could have otherwise helped analyze the incident.
"Charging people for premium features necessary to not get hacked is like selling a car and then charging extra for seatbelts and airbags," U.S. Senator Ron Wyden was quoted as saying.
The development also arrives as the U.K.'s Intelligence and Security Committee of Parliament (ISC) published a detailed Report on China, calling out its "highly effective cyber espionage capability" and its ability to penetrate a diverse range of foreign government and private sector IT systems.