[ISN] The Rise of the Digital Thugs

[InfoSec News]

http://www.nytimes.com/2005/08/07/business/yourmoney/07stalk.html

By TIMOTHY L. O'BRIEN
August 7, 2005

EARLY last year, the corporate stalker made his move. He sent more 
than a dozen menacing e-mail messages to Daniel I. Videtto, the 
president of MicroPatent, a patent and trademarking firm, threatening 
to derail its operations unless he was paid $17 million. 

In a pair of missives fired off on Feb. 3, 2004, the stalker said that 
he had thousands of proprietary MicroPatent documents, confidential 
customer data, computer passwords and e-mail addresses. Using an alias 
of "Brian Ryan" and signing off as "Wounded Grizzly," he warned that 
if Mr. Videtto ignored his demands, the information would "end up in 
e-mail boxes worldwide." 

He also threatened to stymie the online operations of MicroPatent's 
clients by sending "salvo after salvo" of Internet attacks against 
them, stuffing their computers so full of MicroPatent data that they 
would shut down. Another message about two weeks later warned that if 
he did not get the money in three days, "the war will expand." 

Unbeknownst to the stalker, MicroPatent had been quietly trying to 
track him for years, though without success. He was able to mask his 
online identity so deftly that he routinely avoided capture, despite 
the involvement of federal investigators. 

But in late 2003 the company upped the ante. It retained private 
investigators and deployed a former psychological profiler for the 
Central Intelligence Agency to put a face on the stalker. The manhunt, 
according to court documents and investigators, led last year to a 
suburban home in Hyattsville, Md., its basement stocked with parts for 
makeshift hand grenades and ingredients for ricin, one of the most 
potent and lethal biological toxins. Last March, on the same day that 
they raided his home, the authorities arrested the stalker as he sat 
in his car composing e-mail messages he planned to send wirelessly to 
Mr. Videtto. The stalker has since pleaded guilty to charges of 
extortion and possession of toxic materials. 

What happened to MicroPatent is happening to other companies. Law 
enforcement authorities and computer security specialists warn that 
new breeds of white-collar criminals are on the prowl: corporate 
stalkers who are either computer-savvy extortionists, looking to shake 
down companies for large bribes, or malicious competitors who are 
trying to gain an upper hand in the marketplace.

"It's definitely a growing issue and problem, and it's something we 
think will definitely increase in both the numbers and severity," said 
Frank Harrill, an agent with the Federal Bureau of Investigation who 
specializes in computer crimes and who has investigated corporate 
stalkers and online extortionists. The reason, he said, is that "the 
Internet is ceasing to be a means for communication and commerce and 
is becoming the means for communication and commerce."

Though the number of corporate stalkers appears to be growing - along 
with the number of payoffs to online extortionists - quantifying the 
dimensions of the threat is difficult. Last fall, a researcher at 
Carnegie Mellon University in Pittsburgh published a study of online 
extortion involving small and medium-sized businesses, saying that the 
Internet's global reach had produced "a profound change in the nature 
of crime, as the existence of information systems and networks now 
makes criminal acts possible that were not before, both in increased 
scope and ease."

THE study also concluded that while the threat of cyberextortion was 
real and mounting, data and research about the subject were scant. 
That is because most businesses, particularly blue-chip companies, are 
concerned about negative publicity from computer security breaches and 
do not want to report digital bullying and intrusions to law 
enforcement officials.

"Cyberextortion was the main threat I identified that I thought 
corporations were overlooking," said Gregory M. Bednarski, the author 
of the Carnegie Mellon study, who now works at PricewaterhouseCoopers 
as a computer security consultant. "Unfortunately, I think that's 
still the issue - most companies are still not taking cyberextortion 
seriously enough. They just don't see themselves as vulnerable."

MicroPatent, based in East Haven, Conn., realized firsthand how 
vulnerable its data was. The company was also an exception in the 
world of cyberextortion victims: it chose not only to fight back and 
to contact the authorities, but it also assembled its own team of 
specialists familiar with the strategies and weaponry of 
cybercriminals. 

Even so, MicroPatent's stalker, using hijacked Internet accounts and 
pirated wireless networks, was remarkably elusive. "What this means is 
that the criminals are getting smarter," said Scott K. Larson, a 
former F.B.I. agent and a managing director of Stroz Friedberg, a 
private investigation firm that helped hunt down MicroPatent's 
stalker. "There's an arms race going on in cyberspace and in 
cybercrimes."

MicroPatent, a business that court papers describe as one of the 
world's largest commercial depositories of online patent data, first 
came under attack four years ago. Someone penetrated the company's 
databases and began transmitting phony e-mail messages to its 
customers. The messages were what are known as "spoofs," online 
communications - embroidered with pilfered company logos or names and 
e-mail addresses of MicroPatent employees - that are meant to trick 
recipients into believing that the messages were authorized. 

The spoofs, according to court papers and investigators, contained 
derogatory comments about MicroPatent in the subject lines or text. 
Some included sexually explicit attachments, such as sex-toy patents 
that a computer hacker had culled from the company's online files. 

MicroPatent and its parent company, the Thomson Corporation, did not 
respond to several phone calls seeking comment. But others with direct 
knowledge of the hunt for the company's stalker said MicroPatent, 
which had grown rapidly through acquisitions, had a computer network 
containing stretches of online turf that were once used by acquirees 
but were abandoned after the takeovers. 

Those digital back alleys offered access to the entire MicroPatent 
network to people with old passwords. Once inside, they could inhabit 
the network undetected - in much the same way that anyone with a key 
to one abandoned house on a block of abandoned houses can live in a 
populous city without anyone knowing he is there. And MicroPatent's 
stalker was lurking on one of its network's nether zones.

By 2003, MicroPatent had become so frustrated with its unknown stalker 
that it reached out to the F.B.I. for help. But with its resources 
spread thin, the F.B.I. could not pin down the stalker's identity, his 
motivations or how he managed to trespass on MicroPatent's electronic 
turf. A year later, MicroPatent hired Stroz Friedburg and secured the 
services of Eric D. Shaw, a clinical psychologist who had once 
profiled terrorists and foreign potentates for the C.I.A.

The first order of business, investigators said, was to narrow the 
field of MicroPatent's potential stalkers and to try to isolate the 
perpetrator. "You need to take the temperature of the person on the 
other side and determine how seriously you need to take them," said 
Beryl Howell, who supervised the MicroPatent investigation for Stroz 
Friedburg. "Is it a youngster or is it someone who's angry? Is it 
someone who's fooling around or someone who's much more serious?"

Investigators said their examination of the stalker's communications 
indicated that he was much more than a hacker on a joy ride. That 
would be consistent with what law enforcement authorities and computer 
security specialists describe as the recent evolution of computer 
crime: from an unstructured digital underground of adolescent hackers 
and script-kiddies to what Mr. Bednarski describes in his study as 
"information merchants" representing "a structured threat that comes 
from profit-oriented and highly secretive professionals."

STEALING and selling data has become so lucrative, analysts say, that 
corporate espionage, identity theft and software piracy have 
mushroomed as profit centers for criminal groups. Analysts say 
cyberextortion is the newest addition to the digital Mafia's bag of 
tricks.

"Generally speaking, it's pretty clear it's on the upswing, but it's 
hard to gauge how big of an upswing because in a lot of cases it seems 
companies are paying the money," said Robert Richardson, editorial 
director of the Computer Security Institute, an organization in San 
Francisco that trains computer security professionals. "There's 
definitely a group of virus writers and hackers in Russia and in the 
Eastern European bloc that the Russian mob has tapped into."

Mr. Richardson is a co-author of an annual computer-security study 
that his organization publishes with the F.B.I. The latest version 
said that while corporate and institutional computer break-ins 
increased slightly last year from 2003, average financial losses 
stemming from those intrusions decreased substantially in all but two 
categories: unauthorized access to data and theft of proprietary 
information.

Among 639 of the survey's respondents, the average loss from 
unauthorized data access grew to $303,234 in 2004 from $51,545 in 
2003; average losses from information theft rose to $355,552 from 
$168,529. The respondents suffered total losses in the two categories 
of about $62 million last year. While many cyberextortionists and 
cyberstalkers may be members of overseas crime groups, several recent 
prosecutions suggest that they can also be operating solo and hail 
from much less exotic climes - like the office building just down the 
street. 

In March, a federal judge in San Francisco sentenced a Southern 
California businessman, Mark Erfurt, to five months in prison, 
followed by three and a half years of home detention and supervised 
release, for hacking into the databases of a competitor, the 
Manufacturing Electronic Sales Corporation, and disrupting its 
business. In June, the F.B.I. in Los Angeles arrested Richard Brewer, 
a former Web administrator for a trade show company, accusing him of 
disabling his employer's Web site and threatening further damage 
unless he was paid off. And last month in New York, the Westchester 
County district attorney's office charged a Tarrytown businessman, 
Gerald Martin, with hacking into a competitor's computer network in 
order to ruin its business by tampering with its phone system.

Small-fry stuff, some of this, except that even local law enforcement 
officials say the episodes are multiplying. "We have 590,000 people in 
our county, but we're seeing lots of examples of lax or lackadaisical 
computer security," said Sgt. Mike Nevil, head of the computer crimes 
unit of the Ocean County, N.J., prosecutor's office. "We've seen lots 
of examples of people going onto a competitor's computer network and 
clearing out whatever information they can get."

For its part, MicroPatent initially believed that its problems were 
the work of a competitor. It sued one company that it suspected but 
later dropped that lawsuit. After Ms. Howell's team joined the fray in 
late 2003, MicroPatent and its consultants began to isolate the 
stalker, using a small list of candidates distilled from earlier 
investigative work. 

Dr. Shaw's analysis of e-mail messages led them to believe that they 
were tracking a technologically sophisticated man, older than 30, with 
a history of work problems and personal conflicts, who was 
compulsively obsessed with details and who might own weapons. The 
stalker was extremely angry and "holding a grudge," Dr. Shaw recalled. 
"People like that can be very dangerous. He referred to himself as a 
soldier behind enemy lines."

Within a few weeks, Dr. Shaw's analysis led the investigative team to 
focus on Myron Tereshchuk, a 43-year-old Maryland entrepreneur who ran 
his own patent business and had once been rebuffed by MicroPatent when 
he applied to the company for a job. And Mr. Tereshchuk was indeed 
their man. Members of Ms. Howell's investigative team all said that 
Dr. Shaw's profiling was a breakthrough in the pursuit, but that 
without the subsequent involvement of local and federal law 
enforcement officials, Mr. Tereshchuk would not have been captured.

"It's about grinding out a lot of data; it's not about intuition - 
though years of working clinically with patients is certainly 
important," Dr. Shaw said. "The Myron case involved a fair amount of 
case management because we needed to keep him talking, we needed to 
keep him engaged, so we could set him up for an arrest."

Indeed, the detective work that led to his arrest offers a revealing 
glimpse into how the new cat-and-mouse game is played in cyberspace - 
especially when the cloak of secrecy offered by newfangled wireless 
devices makes digital criminals so hard to track. 

In early 2004, private investigators began corresponding with the 
stalker, sending spoofed e-mail back to him in the "voice" of a 
MicroPatent lawyer. At the same time, federal authorities began 
physically tracking Mr. Tereshchuk's comings and goings in the real 
world. By February, the stalker had also become an active e-mail 
correspondent with Mr. Videtto, the MicroPatent president.

It was then that the stalker made a series of mistakes. Among them, he 
began to brag. In an e-mail message titled "Fire them all," he 
informed Mr. Videtto that he had found valuable MicroPatent documents 
by going "Dumpster diving to the Dumpster and recycle bins located in 
a parking lot on Shawnee Road" in Alexandria, Va., where the company 
maintained a branch office. That allowed investigators to zero in on 
his location, further buttressing the notion that Mr. Tereshchuk, who 
lived nearby, was the author of the scheme.

In the same message, the stalker wrote angrily that staff members at 
the United States Patent and Trademark Office in northern Virginia had 
snubbed him and given preferential treatment to MicroPatent employees. 
Several years earlier, a patent office worker accused Mr. Tereshchuk 
of threatening to bomb the agency. 

A computer forensics expert embedded a Web bug, a kind of digital 
tracking device, in one of the e-mail messages that Mr. Videtto sent 
to the stalker. But the stalker screened his e-mail with decoding 
devices that included a hex editor, software that allows users to 
preview the contents of incoming files, and he uncovered the bug. "Was 
it a script to capture my IP address?" the stalker wrote tauntingly to 
Mr. Videtto after finding the Web bug, referring to his Internet 
Protocol address. "I'll look at it later with a hex editor."

Investigators said the failed bug worried them because they thought it 
might scare off the stalker, but by this point Mr. Tereshchuk had 
already demanded his $17 million extortion payment. He also clumsily 
revealed his identity by demanding that the money be sent to the 
person accused of threatening to bomb the patent office. And he kept 
sending e-mail messages telling Mr. Videtto that he had MicroPatent's 
customer lists, patent applications, customer credit card numbers and 
the Social Security numbers of some employees, as well as the 
employees' birth dates, home addresses and the names of their spouses 
and children. 

The stalker also threatened to flood the computer networks of 
MicroPatent clients with information pilfered from the company, 
overwhelming the customers' ability to process the data and thereby 
shuttering their online operations - a surreptitious digital attack 
known as distributed denial of service, or D.D.O.S. Such assaults, 
analysts and law enforcement officials say, have become a trademark of 
cyberextortionists. Federal prosecutors in Los Angeles are currently 
investigating a group of possible cyberextortionists linked to a 
television retailer indicted there last August. The retailer was 
accused of disrupting competitors' online operations, and prosecutors 
have called suspects in that case the "D.D.O.S. Mafia."

"D.D.O.S. attacks are still one of the primary ways of extorting a 
company, and we're seeing a lot of that," said Larry D. Johnson, 
special agent in charge of the United States Secret Service's criminal 
division. "I think the bad guys know that if the extortion amounts are 
relatively low a company will simply pay to make them go away."

Mr. Tereshchuk's apparent ability to start a D.D.O.S. attack attested 
to what investigators describe as his unusual technological dexterity, 
despite evidence of his psychological instability. It also explained 
how he was able to evade detection for years, and his methods for 
pulling off that feat surfaced after the F.B.I. began following him. 

Using wireless computing gear stashed in an old, blue Pontiac, and 
fishing for access from an antenna mounted on his car's dashboard, Mr. 
Tereshchuk cruised Virginia and Maryland neighborhoods. As he did so, 
federal court documents say, he lifted Yahoo and America Online 
accounts and passwords from unwitting homeowners and businesspeople 
with wireless Internet connections. The documents also say he then 
hijacked the accounts and routed e-mail messages to MicroPatent from 
them; he used wireless home networks he had commandeered to hack into 
MicroPatent's computer network and occasionally made use of online 
accounts at the University of Maryland's student computer lab, which 
he had also anonymously penetrated.

BY late February of last year, however, the F.B.I. had laid digital 
traps for Mr. Tereshchuk inside the student lab, which was near his 
home. As investigators began to close in on him, his e-mail messages 
to Mr. Videtto became more frantic. A note sent on Feb. 28 told Mr. 
Videtto that if he forked over the $17 million then "everything gets 
deactivated, sanitized, and life will go on for everybody." 

In his last e-mail message, sent several days later, he dropped his 
guard completely: "I am overwhelmed with the amount of information 
that can be used for embarrassment," he wrote. "When Myron gets 
compensated, things start to get deactivated."

On March 10, 2004, federal agents swarmed Mr. Tereshchuk's home, where 
they found the hand-grenade components and ricin ingredients. The 
agents arrested him in his car the same day, in the midst of writing 
his new crop of e-mail messages to Mr. Videtto.

Late last year, Mr. Tereshchuk was sentenced to five years in prison 
after pleading guilty to a criminal extortion charge filed by the 
United States attorney's office in Alexandria. Earlier this year he 
pleaded guilty to criminal possession of explosives and biological 
weapons, charges that the United States attorney's office in Baltimore 
had filed against him. Possessing illegal toxins carries a maximum 
term of life in prison. Mr. Tereshchuk is expected to be sentenced 
this fall.