Russian Hackers Breach Microsoft’s “Keys to the Kingdom”: Expert Analysis

As news on an alleged Russian hack against Microsoft continues to unfold — with the latest reports revealing that Microsoft has not been yet able to shake down the Russian-linked criminal group Midnight Blizzard (also known as Nobelium), experts weigh in on the consequences of the attack.

Cybersecurity organizations believe the attack has national and international security implications due to the nature of the Microsoft supply chain and its partners across all sectors — from government, defense, industrial and business sectors. Experts also believe the public may be exposed to risk.

Techopedia talked to cybersecurity and compliance experts to understand what the attack means, who it affects, and how this conversation should move forward.

Key Takeaways

  • State-supported cybercriminals have breached Microsoft source code repositories, sensitive company information, partner communications, and much more.
  • As the attack continues to develop and attackers persist in their efforts against Microsoft, experts talk about the consequences.
  • From cybersecurity to privacy and compliance, the Microsoft breach is considered serious on all fronts.
  • Despite Microsoft assuring no front-facing systems have been accessed, experts say that exfiltrated source code can lead to an increase in zero-day vulnerabilities, which has the potential to affect organizations, users, and the public.

How Bad is the Microsoft Attack?

Microsoft says on its blog and SEC disclosure form that no customer-facing systems have been compromised and that the operations of the company have not been disrupted.

However, due to the sensitive nature of the data that was stolen and systems that were affected, many believe that Russians took the ”Keys to the Kingdom”  —a phrase Microsoft uses on its support pages about securing your devices and accounts.

Ariel Parnes, COO and Co-Founder at Mitiga and former Head of the Israeli Intelligence Service Cyber Department described the attack as “severe”.

“This incident, initially disclosed in January, has now been recognized as far more severe than initially understood, underscoring the critical nature of source code security in the digital age.”

Shawn Waldman, CEO and Founder of Secure Cyber Defense also had strong words when referring to the depths and the consequences of that attack.

“The hack was a worst-case scenario, with access gained not only by a hacker but one of the largest Russian nation-state attackers. Their intentions extend far beyond seeking a ransom; they aim to penetrate national security and inflict sustained harm.”

“In this case, the threat actor was able to access the source code of an undisclosed number of Microsoft products as well as internal emails,” Waldman added.  

Microsoft Source Code Compromised

Systems and data accessed by Midnight Blizzard in this persistent ongoing series of cyberattacks against Microsoft — which began in November 2023 — include: emails of senior leadership team members, confidential Microsoft emails with partners, cryptographic secrets such as passwords, certificates, and authentication keys, and source code.

“Source code is essentially the foundational code of software programs — it’s what makes the software operate the way it does,” Parnes explained.

“For advanced nation-state cyber groups, access to a company’s source code is akin to finding the master key to its digital kingdom, opening up avenues for finding new zero-day vulnerabilities: undiscovered security flaws that can be exploited before they’re known to the software creators or the public.

“These vulnerabilities are incredibly dangerous because they provide hackers a covert path to infiltrate systems, often with significant impacts before any defensive measures can be implemented,” Parnes added.

Waldman agreed with Parnes.

“For users of Microsoft products, the situation is deeply concerning. The breach by a nation-state threat actor, with access to the source code, significantly increases the likelihood of discovering and exploiting previously unknown zero-day vulnerabilities.”

Waldman added that the incident is also a serious blow for Microsoft´s “reputation as a vendor, who is doing a lot of talk about securing your organization.”

He compared this incident with the Ivanti vulnerability and the 2017 Eternal Blue incident.

EternalBlue is a Microsoft software exploit developed by the NSA to gather intelligence — the exploit allows remote access to data on Microsoft devices. EternalBlue was stolen from the NSA in 2017 and since then has been actively involved in cyberattacks around the world.

“This incident echoes the recent attack on CISA via the Ivanti vulnerability, highlighting a recurring issue in cybersecurity,” Waldman said. “Recall the Eternal Blue incident in 2017, where the National Security Agency (NSA) discovered and exploited a Microsoft vulnerability for its purposes without informing Microsoft.

“We find ourselves in a similar predicament, underscoring the critical need for vigilance and improved security protocols to protect against such sophisticated threats.”

Global and Regional Compliance Implications

Besides cybersecurity risks, Microsoft environment users and partners could face compliance complications. The full reach of the consequences of the recent Microsoft hack are still unclear.

However, there are some potential areas of impact, including breaches of international, federal, or state laws, potential for legal cases, fines and cybersecurity breaches for organizations and users of the Microsoft supply chain and partners around the world, as well as reputation damages.

Larry Whiteside, Jr., a former U.S. Air Force Officer with more than 25 years of experience in building and overseeing cybersecurity programs, and CISO of RegScale —  a continuous controls monitoring (CCM) platform that helps companies streamline governance, risk, and compliance spoke to Techopedia about the issue.

“Threat actors exploit weaknesses to access a company’s data, which they then extort and/or exfiltrate. Following this, the company begins getting pounded by regulators from different countries over the specificities of the data and its impact on their citizens, leading to a myriad of questions in an effort to identify how the breach occurred.”

Because the Microsoft environment is international, other compliance issues may also emerge, as Whiteside said.

“Even though the questions from each country’s regulators are similar, the responses carry different implications, and the outcomes of those answers will impose different penalties.”

Whiteside spoke about how the global compliance landscape risks pressure Governance, Risk, and Compliance (GRC) teams.

“This puts GRC teams in a never-ending battle of geographic whack-a-mole. Each time a breach or significant event happens, the level of effort to determine what regulations are impacted and the reporting requirements for those regulations becomes an immense crossword puzzle.

“Providers like Azure, Google Cloud, and AWS are not just participants in the global technology market; they are its architects, shaping the digital landscape.

“Considering the scale of the environments they have established around the world, they should take a proactive and collaborative role in shaping global regulations.

“They (cloud providers) need to balance their business interests with the broader public interest, leveraging their influence responsibly to advance a secure, efficient, and equitable global digital ecosystem.”

Aftermath Security: Zero-Day Vulnerability and Threat Hunting

While Microsoft has not disclosed in full detail what information has been exfiltrated, the company assured it was in communication with its partners to secure systems. However, as we already mentioned — and as the experts we interviewed agreed — the attack on Microsoft may lead to zero-day vulnerabilities because source code has been compromised.

Zero-day vulnerabilities can affect back and front-facing Microsoft operations, this means the public too. Parnes from Mitiga explained why zero-day vulnerabilities are so dangerous and urged organizations to take proactive defense measures.

“Zero-day vulnerabilities represent a critical threat because there’s no straightforward way to detect them until after they’ve been discovered and disclosed by the software creators.

 

“Given this challenging landscape, organizations need to double down on cybersecurity measures focused on proactive defense.”

Parnes added that waiting for the disclosure of vulnerabilities isn’t a viable strategy against zero-day threats.

“Organizations must invest in advanced threat-hunting capabilities. This involves actively searching for potential threats that might not yet be known, monitoring systems for any anomalies that could indicate an intrusion, and pulling on investigative threads that could uncover hidden breaches.”

Additionally, Parnes spoke about the importance of having a robust incident response plan and a strong security culture across an organization.

By understanding the grave risks posed by zero-day vulnerabilities and taking comprehensive measures to mitigate them, organizations can better protect their critical digital assets against the ever-evolving threats posed by nation-state cyber actors,” Parnes assured.

The Bottom Line

It’s impossible to talk about the Microsoft hack — executed by all accounts by a Russian-supported cybercriminal gang — without saying the attack is nothing but a serious escalation in the current state of global cyber warfare.

This new attack also brings many messages and learnings. If a company like Microsoft — trusted by millions of organizations and users worldwide because of its high-security standards — can experience such a severe cyber breach, two scenarios are possible. One, Microsoft standards are not as high as expected, or two, cyberattackers have the capabilities and tech resources necessary to breach even the safest, richest companies in the world.

Furthermore, we are witnessing how attacks on supply chains, which started out affecting small networks, become extremely dangerous.

It is also more than likely that cybercriminals are learning from this attack as well. Going after specific organizations to compromise important supply chains is a trend that has been playing out throughout the past years.

Additionally, this attack adds tension to the already tense geopolitical environment. The ongoing Russia-Ukraine war, the Israel-Hamas war, and other major international events such as elections, are spilling into the borderless digital world in the form of cyberattacks.

Cybersecurity is an ongoing battle and while organizations know they must continuously adapt their defenses to stay ahead of evolving threats, cybersecurity incidents are becoming every day more serious.

In this ongoing new digital Cold War, the Microsoft hack is another wake-up call. The question arises; How damaging must the next cyber attack be before real change happens?