Colonial Pipeline Paid $5 Million Ransom To Hackers

[Bloomberg] Colonial Pipeline Co. paid nearly $5 million to
Eastern European hackers on Friday, contradicting reports earlier
this week that the company had no intention of paying an extortion
fee to help restore the country’s largest fuel pipeline, according
to two people familiar with the transaction.

The company paid the hefty ransom in difficult-to-trace
cryptocurrency within hours after the attack, underscoring the
immense pressure faced by the Georgia-based operator to get
gasoline and jet fuel flowing again to major cities along the
Eastern Seaboard, those people said. A third person familiar with
the situation said U.S. government officials are aware that
Colonial made the payment.

Once they received the payment, the hackers provided the
operator with a decrypting tool to restore its disabled computer
network. The tool was so slow that the company continued using its
own backups to help restore the system, one of the people familiar
with the company’s efforts said.

A representative from Colonial declined to comment, as did a
spokesperson for the National Security Council. Colonial said it
began to resume fuel shipments around 5 p.m. Eastern time
Wednesday.

The hackers, which the FBI said are linked to a group called
DarkSide, specialize in digital extortion and are believed to be
located in Russia or Eastern Europe.

On Wednesday, media outlets including the Washington Post and
Reuters, also based on anonymous sources, reported that the company
had no immediate intention of paying the ransom.

Ransomware is a type of malware that locks up a victim’s files,
which the attackers promise to unlock for a payment. More recently,
some ransomware groups have also stolen victims’ data and
threatened to release it unless paid — a kind of double
extortion.

The FBI discourages organizations from paying ransom to hackers,
saying there is no guarantee they will follow through on promises
to unlock files. It also provides incentive to other would-be
hackers, the agency says.

However, Anne Neuberger, the White House’s top cybersecurity
official, pointedly declined to say whether companies should pay
cyber ransoms at a briefing earlier this week. “We recognize,
though, that companies are often in a difficult position if their
data is encrypted and they do not have backups and cannot recover
the data,” she told reporters Monday.

Such guidance provides a quandary for victims who have to weigh
the risks of not paying with the costs of lost or exposed records.
The reality is that many choose to pay, in part because the costs
may be covered if they have cyber-insurance policies.

“They had to pay,” said Ondrej Krehel, chief executive officer
and founder of digital forensics firm LIFARS and a former cyber
expert at Loews Corp., which owns Boardwalk Pipeline. “This is a
cyber cancer. You want to die or you want to live? It’s not a
situation where you can wait.”

Krehel said a $5 million ransom for a pipeline was “very low.”
“Ransom is usually around $25 million to $35 million for such a
company. I think the threat actor realized they stepped on the
wrong company and triggered a massive government response,” he
said.

A report released last month by a ransomware task force said the
amount paid by victims increased by 311% in 2020, reaching about
$350 million in cryptocurrency. The average ransom paid by
organizations in 2020 was $312,493, according to report.

Colonial, which operates the largest fuel pipeline in the U.S.,
became aware of the hack around May 7 and shut down its operations,
which led to fuel shortages and lines at gas stations along the
East Coast.

[Bloomberg] Colonial Pipeline Co. paid nearly $5 million to
Eastern European hackers on Friday, contradicting reports earlier
this week that the company had no intention of paying an extortion
fee to help restore the country’s largest fuel pipeline, according
to two people familiar with the transaction.

The company paid the hefty ransom in difficult-to-trace
cryptocurrency within hours after the attack, underscoring the
immense pressure faced by the Georgia-based operator to get
gasoline and jet fuel flowing again to major cities along the
Eastern Seaboard, those people said. A third person familiar with
the situation said U.S. government officials are aware that
Colonial made the payment.

Once they received the payment, the hackers provided the
operator with a decrypting tool to restore its disabled computer
network. The tool was so slow that the company continued using its
own backups to help restore the system, one of the people familiar
with the company’s efforts said.

A representative from Colonial declined to comment, as did a
spokesperson for the National Security Council. Colonial said it
began to resume fuel shipments around 5 p.m. Eastern time
Wednesday.

The hackers, which the FBI said are linked to a group called
DarkSide, specialize in digital extortion and are believed to be
located in Russia or Eastern Europe.

On Wednesday, media outlets including the Washington Post and
Reuters, also based on anonymous sources, reported that the company
had no immediate intention of paying the ransom.

Ransomware is a type of malware that locks up a victim’s files,
which the attackers promise to unlock for a payment. More recently,
some ransomware groups have also stolen victims’ data and
threatened to release it unless paid — a kind of double
extortion.

The FBI discourages organizations from paying ransom to hackers,
saying there is no guarantee they will follow through on promises
to unlock files. It also provides incentive to other would-be
hackers, the agency says.

However, Anne Neuberger, the White House’s top cybersecurity
official, pointedly declined to say whether companies should pay
cyber ransoms at a briefing earlier this week. “We recognize,
though, that companies are often in a difficult position if their
data is encrypted and they do not have backups and cannot recover
the data,” she told reporters Monday.

Such guidance provides a quandary for victims who have to weigh
the risks of not paying with the costs of lost or exposed records.
The reality is that many choose to pay, in part because the costs
may be covered if they have cyber-insurance policies.

“They had to pay,” said Ondrej Krehel, chief executive officer
and founder of digital forensics firm LIFARS and a former cyber
expert at Loews Corp., which owns Boardwalk Pipeline. “This is a
cyber cancer. You want to die or you want to live? It’s not a
situation where you can wait.”

Krehel said a $5 million ransom for a pipeline was “very low.”
“Ransom is usually around $25 million to $35 million for such a
company. I think the threat actor realized they stepped on the
wrong company and triggered a massive government response,” he
said.

A report released last month by a ransomware task force said the
amount paid by victims increased by 311% in 2020, reaching about
$350 million in cryptocurrency. The average ransom paid by
organizations in 2020 was $312,493, according to report.

Colonial, which operates the largest fuel pipeline in the U.S.,
became aware of the hack around May 7 and shut down its operations,
which led to fuel shortages and lines at gas stations along the
East Coast.