A Canadian hacker has admitted being part of a group responsible for several major cyberattacks. Connor Riley Moucka pleaded guilty to being part of a coterie of hackers that hit 165 organizations, resulting in the theft of customer records and the extortion of millions of dollars.

Industry sources have identified Moucka as one of the main players in attacks on data hosted by cloud data warehouse Snowflake. Companies affected by the hacks include the likes of AT&T, Ticketmaster and the Neiman Marcus Group.

He worked with two other hackers: John Edward Binns and Cameron John Wagenius. Binns was not in US custody as of April 2026, while Wagenius, going by the name of Kiberphant0m, was arrested in January 2025 and pleaded guilty in July that year

Moucka and other members of the group used stolen login credentials to compromise data belonging to at least 165 customers of a US-based software-as-a-service company. This unauthorized access was used to steal billions of sensitive customer records and download terabytes of information,

“Connor Moucka hacked over 150 companies and organizations, obtained extremely sensitive information, and extorted the victims for millions of dollars. Today’s guilty plea serves as a reminder to all cybercriminals, regardless of where they live, that they cannot hide behind a wall of anonymity. You will be found and brought to justice,” said assistant attorney general A. Tysen Duva of the Justice Department’s Criminal Division

The trial is the result of a coordinated worldwide action against the Snowflake group. The investigation was led by the FBI but benefited from contributions from the Royal Canadian Mounted Police, the Australian Federal Police, Spain’s Guardia Civil, the Security Service of Ukraine and the Turkish National Police.

This article first appeared on CSO.

Given the widespread enterprise adoption of passkeys to replace passwords, a Palo Alto Networks Unit 42 report disclosing ways attackers are getting around passkey protections is concerning, analysts say, but they stress that the demonstrated attacks can only happen after a successful intrusion.

They also pointed out that the issues are not strictly caused by holes in passkeys so much as by weaknesses in the procedures surrounding them. 

“The researchers didn’t break the underlying cryptography. They exploited the seams around it: onboarding flows, recovery mechanisms and trust signals that weren’t being validated,” said Justin Greis, CEO of consulting firm Acceligence. “That distinction matters because it tells us where the actual risk lives.”

The Palo Alto report showed attacks that, it said, “demonstrate how malware on a compromised endpoint can misuse onboarding, recovery and device trust workflows to take over passkey-protected accounts,” as well as “how an attacker can authenticate without user interaction, bypass user verification requirements and extract all synced passkey private keys.”

Palo Alto described three categories of attack, collectively dubbed Pass-ta-key: Pass-ta-key, where an attacker takes over an account protected by a Google-synced passkey using malware running on the victim’s device, without requiring privilege escalation, device unlock or user interaction; Silver Pass-ta-key, which involves an attacker tricking Google Cloud Authenticator into believing the victim has unlocked the device with biometrics, leading to full account takeover without using the victim’s device during authentication; and Golden Pass-ta-key, which allows an attacker to extract all synced passkeys in a form that lets them be shared or sold on the credential black market.

Given the complexity of most global enterprise threat surfaces, some CISOs have struggled with adapting passwordless processes to environments with legacy and virtual environments. Passcodes have been recently embraced by enterprise CISOs as the first step in implementing a passwordless strategy.

Analysts and consultants in the main agreed that the flaw Palo Alto reports is significant, despite the fact that it assumes the attacker has already penetrated an environment and successfully installed malware. Sadly, given that such penetration only requires one privileged user anywhere to accidentally click on a poisoned link or attachment, the assumption of prior penetration is likely valid.

Implementation issues are the problem

What the report reveals is less about any flaws within passcodes directly, and more about the lack of attention paid to a wide range of mechanisms surrounding them. 

Greis said CISOs now need to focus on what to do, and what to test, based on the assumption that user behavior is not always as expected. 

In several cases cited in the report, he pointed out, issues occurred “not because the standard is flawed, but because implementations haven’t caught up to it. It mirrors what we’ve seen repeatedly in security: the specification is sound, but the ecosystem implementing it is uneven.”

Consultant Brian Levine, executive director of FormerGov, agreed. 

“On any service where your organization is the relying party, require user verification and actually validate the user-verified flag in the authentication response,” he said. “The researchers found real-world services accepting logins without it, which quietly collapses a multi-factor login back into a single factor.”

Frank Dickson, group VP for security at IDC, added that he would stress to CISOs that this attack assumes a prior successful penetration. 

“This isn’t passkeys getting hacked from across the internet. It’s what [an attacker] does once they’re already inside the house. So the real headline is that ‘phishing resistant’ stops being resistant the moment the endpoint stops being clean,” he said.

“Stop treating verification as optional,” he advised. “Flip it to required, check it server side every single time, and save your hardware bound keys, the YubiKeys of the world, for the accounts that matter most. A key that never leaves a physical device is a key no attacker can ever harvest in bulk.”

Or Finkelstein, head of marketing at Secret Double Octopus, agreed that CISOs have gotten complacent about the way in which systems support passkeys.

“CISOs should probably look at how user verification is enforced, how enrollment and recovery work, have a clear and enforced policy on whether credentials are synced or device-bound, and have some ITDR system to quickly mitigate suspicious endpoints and authenticators,” he said. “In most serious enterprise environments, EDR and device management reduce the likelihood of initial attacks, but do not close every post-compromise attack path.”

Poor support processes weaken passkeys

Some have argued that the lack of sufficiently robust support processes actually weakens passkey capabilities and undermines the whole point of such systems.

J. Wolfgang Goerlich, a member of the faculty of IANS and a longtime cybersecurity consultant, pointed out that the original FIDO2 spec eliminated credential theft by binding the private key to a physical authenticator. Synced passkeys reintroduced credential portability and therefore reintroduced the form of credential theft risk cited in the Palo Alto report.

“A passwordless system is exactly as strong as the flow that re-establishes it,” he said. “Both serious techniques here start by forcing a device to re-enroll. Many security teams have never modeled, never monitored and never rehearsed a response to this.”

Goerlich’s advice to CISOs is to require device-bound authenticators, such as hardware tokens or computers, for all privileged and sensitive access. They may consider allowing wallets for lower risk access, he said, “however, much like passwords in Web browsers have long been at risk, we must now consider passkeys in the browsers an unacceptable risk.”

This article originally appeared on CSOonline.

An “AI worm” can spread through Microsoft Word documents using Copilot as a vector, a prominent Norwegian AI researcher reported on Tuesday.

The report from Håkon Måløy, later confirmed by Microsoft, said that an attacker can conceal instructions in a document that is later used as source material for Copilot-generated or Copilot-edited Word documents, for example, as input to a financial report. Those malicious instructions could potentially alter figures in the document being created. They then copy themselves into the new document, causing it to become a carrier of the attack when used in another Copilot-assisted workflow.

Måløy noted: “To my knowledge, this is among the first public demonstrations of document-borne AI-worm self-propagation through normal workflows in a mainstream commercial productivity suite.”

Microsoft on Thursday emailed a statement to CSOonline discussing the report’s revelations. 

“We have addressed the findings reported by the researcher and thank them for working with us through coordinated vulnerability disclosure. To address this class of risk, we use a defense-in-depth strategy with safeguards that block malicious instructions at multiple points and help keep tasks aligned with users’ requests,” Microsoft said.

“We are continuously strengthening these safeguards as the technology and threat landscape evolve,” it added. “We encourage customers to install the latest updates, use multiple layers of security protection, treat content from unknown sources with caution, and review AI-generated content before using or sharing it.” 

Sidesteps defenses

Aman Mahapatra, chief strategy officer for Tribeca Softtech, a New York City-based technology consulting firm, has reviewed the mechanisms used in this vulnerability and says that it is much worse than it might seem, because it will sidestep just about every defensive mechanism enterprises have in place today.

“This is a worm, a self-propagating malware pattern that uses Copilot as the transmission mechanism and legitimate corporate collaboration as the delivery channel. It bypasses every traditional email security control because the document is not malicious on delivery and it becomes malicious when Copilot processes it. That means that it bypasses DLP because the exfiltration happens through the user’s own authenticated Copilot session,” Mahapatra said. “It then bypasses endpoint protection because no code executes, only instructions get followed by an AI service the enterprise has explicitly authorized.”

He also noted that researchers have been warning about this class of attack for two years.

Microsoft’s involvement

Måløy said that he has been working with the Microsoft Security Response Center (MSRC) since March 3 and Microsoft  subsequently implemented and distributed multiple small focused mitigations, but the core vulnerability has yet to be fixed.

He said he was hesitant to disclose an active vulnerability, but felt that it was now time to publish. 

“My reasoning is that defenders cannot reduce exposure to a risk they are unaware of,” Måløy wrote, “and the propagation mechanism described here affects ordinary document workflows that many organizations already rely on.”

In an email interview, Måløy noted that the tweaks Microsoft has implemented were helpful, nonetheless. 

“The coordinated disclosure process showed that mitigations can meaningfully reduce the demonstrated attack surface, making attacks less reliable and limiting their reach, even without completely eliminating the underlying problem,” he said. 

Måløy also addressed the resolution that many analysts and consultants suggested, which is to change the nature of LLMs to fully isolate instructions from the data they operate on. 

“Separating instructions from data may be part of the solution, but I think the distinction between data and instructions is not always clear in real-world workflows. For example, a user may ask an agent to arrange a business trip, requiring the agent to retrieve an email specifying the approved itinerary and a document containing the booking procedure,” Måløy said.

“My view is that the broader challenge is therefore not simply to prevent systems from interpreting external content as instructions, but to evaluate whether those instructions align with the user’s goals and the context in which the system is operating,” he added.

Problem hard to overstate

Mike Wilkes, enterprise CISO at Aikido Security, said it would be difficult to overstate the potential problems from this situation. 

“This is a significant issue because it moves prompt injection from a single compromised interaction into a potentially self-propagating document integrity attack,” he said, noting that it is not a conventional worm that spreads automatically. A user or Copilot workflow must still bring an infected document into the model’s context. “But once that happens, the malicious instructions can reportedly alter business information, conceal themselves inside the resulting Word document and turn a legitimate internal file into the next carrier,” he said.

That, he pointed out, creates “a dangerous enterprise supply chain in which financial reports, contracts, policies and partner documents may inherit malicious behavior while retaining the trust associated with their legitimate authors and Microsoft 365 accounts.”

Not a new issue

The key issue behind this flaw is the fact that genAI tends to struggle with telling the difference between data that a user offers as input and the instructions the AI is to execute.

Flavio Villanustre, CISO for the LexisNexis Risk Solutions Group, observed that the same problem with mixed data and instructions occurred in databases decades ago, and turned into what we know as SQL injection attacks today. But, he noted, a few years later, parametrized binding for the database access layers was developed, which separates instructions, which are handled internally and safely, from data, which can come from untrusted sources. “The same needs to happen with LLMs and other AI,” he said.

Mike Leone, a VP/principal analyst at Moor Insights & Strategy, agreed.

“It’s hard not to chuckle a bit with this one. People have been asking whether data can give orders since SQL injections. We fixed that one by giving the database a way to tell an instruction from a value,” Leone said. “Thirty years later, we’ve built an entire category of software that can’t tell the difference at all.”

Tom Findling, CEO at Conifers.ai, also said he sees the data-vs-instructions issue as the biggest problem. 

“Separating data from instructions is still unsolved at the model layer. The labs are making real progress, but not enough to be your only control,” he said, and stressed, “Microsoft doesn’t need to wait for that. It can slow propagation inside Copilot: stop hidden content from being written into new documents, surface hidden text before it’s used, preserve the trust level of what Copilot read and show all AI-generated changes.”

Fix needs industry agreement

However, Frank Dickson, group VP for security at IDC, argued that a fix needs industry agreement. 

“A fundamental fix requires the industry to converge on the same architectural change, which isn’t happening anytime soon given the incentives and the fact that the major players are far from besties,” he said, pointing out that Instruction-data separation would need to be baked in at the model or platform level across every major vendor. “None of them are rewarding that work commercially right now, so treat that as a multi-year research problem, not something a CISO should wait on.”

Leone disagreed, arguing that a single vendor can do quite a bit, at least for its own customers. 

“Microsoft has said publicly since last year that indirect prompt injection can’t be fully prevented, and I give them credit for saying it out loud rather than pretending otherwise,” Leone said, noting that the industry doesn’t have to move in lockstep. “This attack lives inside one product,” he said. “If Microsoft hardens the Copilot document path, Copilot customers get safer whether or not anyone else moves.”

Dickson added that another critical problem with this vulnerability is that the carrier documents are created by legitimate employees using legitimate tools, “so there’s no obvious point of origin once the payload starts moving; an organization could be laundering corrupted financial figures through its own workflow for weeks before anyone notices.”

Tactics that might help

That said, experts had some specific suggestions for CISOs trying to negate this problem. 

IDC’s Dickson said, “the most useful lever right now sits outside the model entirely, in how much untrusted content Copilot is allowed to pull into a session without a human choosing it.” He noted that enterprises can turn Copilot’s auto-discovery behavior off or restrict it, and require humans to explicitly select the documents they feed it. “That alone closes off one of the two ways the attack gets a foothold,” he said.

IDC also suggested a visible diff or redline of anything Copilot changes in a financial or otherwise consequential document, and the requirement for a human to approve the changes. “That’s not a technical fix, it’s a workflow one, and it’s available today,” Dickson said.

He said that IT should also track where content came from and what was touched by an AI system, in metadata that travels with the document. “It doesn’t stop the injection, but it means when something does get through, an organization can actually trace how far it spread instead of discovering a corrupted number three reports later with no way to reconstruct the chain,” he said.

However, one expert, Tyler Reguly, Fortra’s associate director of security R&D, said that he didn’t see this vulnerability having a meaningful impact because it feels like what he called a “laboratory vulnerability.”

Normal enterprise workflows don’t encompass a number of the necessary steps for compromise, he said, pointing out that, if anything, people are trained not to download Word documents. Plus, he noted, looking at the blurred example in the report, the malicious document contained an additional apparently blank page which held the concealed prompts in white text.

“That page is going to send up warning signs for me if someone even managed to convince me to download an external Word document,” he said. So, overall, “this feels like it requires a perfect storm.”

This article originally appeared on CSOonline.

Traveling enterprise employees beware: Think twice before you log onto that oh-so-convenient public Wi-Fi.

Since at least June, threat actors have been compromising “captive” Wi-Fi gateways and other portal appliances at hotels, conference centers, and similar shared venues to hijack users’ Microsoft 365 accounts, according to the ReliaQuest Threat Research team.

Once a threat actor controls a gateway, they can silently redirect a user’s traffic to their own infrastructure and steal their Microsoft 365 credentials without ever touching the user’s device, compromising endpoints, or sending phishing links or malicious attachments.

“The most dangerous element is that it operates at the network gateway, which sits beneath most of the trust assumptions users and devices make,” ReliaQuest told CSO Online. “It’s not necessarily an enterprise breach level event on its own, but it’s a very real risk to individual accounts.”

Exploiting a ‘fundamental trust’

Domain Name System (DNS) poisoning, in which false data is injected to redirect regular web traffic to fraudulent domains, has previously been observed on small office routers, but attackers are now expanding the technique to higher-level targets, the ReliaQuest researchers explained in a blog post.

Attackers likely gain access to the gateways through weak or reused admin credentials in combination with exposed interfaces like Secure Shell (SSH), Simple Network Management Protocol (SNMP), and other web consoles, they pointed out.

Admin access to the gateway is all that malicious actors need, because devices are designed to inherently trust DNS, which translates domain names like login.microsoftonline[.]com into IP addresses to route them. Therefore, a single gateway compromise gives the attacker the ability to redirect traffic for every guest logging into the network, providing IP addresses it controls in response to DNS requests, rather than the legitimate ones, without touching a single endpoint.

“Captive portal appliances sit at the network perimeter for every guest on that network,” the researchers wrote. “Detection is inherently difficult because the attack happens gateway-side, outside the endpoint’s visibility.”

In the campaign tracked by ReliaQuest, four attacker-registered domains, m365-owa[.]com, owa-ms365[.]com, ms365-device[.]com, and ms365-live[.]com, were used for Microsoft-impersonation lures.

The compromised Wi-Fi gateways were discovered across multiple US cities as well as in India and Saudi Arabia, and impacted users were from companies in professional and financial services, legal, retail, health care, and energy, indicating that the method isn’t sector-specific.

“We’ve seen enough SharePoint exfiltration cases to know that a single popped account can cascade into meaningful data loss,” ReliaQuest noted. Meanwhile, for the network operators, there’s a “reputational dimension”; user compromise is a “serious trust and brand problem, regardless of how sophisticated’ the underlying attack is.”

Safe services, DNSSEC not enough

Locking network configurations to a ‘safe’ DNS provider such as Google (8.8.8.8), Cloudflare (1.1.1.1), or the cloud-based OpenDNS isn’t a sufficient tactic, because it doesn’t change the path that queries actually travel over, ReliaQuest contended.

By default, devices send DNS queries as unencrypted protocol traffic, and those packets still have to traverse the hotel’s network to reach Google, Cloudflare, or OpenDNS, the company explained. Since the gateway sits directly in that path, it can inspect, block, or redirect the query before it ever reaches the chosen resolver.

“Specifying a trusted DNS server changes the intended destination, not who controls the road to get there,” ReliaQuest noted.

Further, Domain Name System Security Extensions (DNSSECs), which use digital signatures and public-key cryptography, only “partially” address the problem. DNSSEC provides authentication and integrity for signed domains, which means a validating resolver can detect and reject forged or tampered responses.

“What it does not do is provide confidentiality or availability,” the company said. “It does not encrypt DNS traffic or stop an attacker from intercepting, blocking, or redirecting requests.”

So while DNSSEC can defeat certain response-forgery attacks against signed zones, an on-path gateway can still see queries, drop them, or force fallback behavior. However, this protection layer only helps when domains are actually signed, and then only when the client or resolver performs validation, which “many stub resolvers do not,” according to ReliaQuest.

Full-tunnel VPNs required

To combat the problem, enterprises should require all corporate devices to use a full-tunnel VPN for network connection. Controls should prevent internet access until a tunnel is active, ReliaQuest advised.

This will route all of a device’s traffic, including DNS, through an encrypted connection to a trusted VPN server before it travels anywhere else, the company explained, thus preventing local networks like hotel gateways from seeing or modifying DNS and internet traffic.

“In effect, it takes the untrusted network out of the trust equation,” ReliaQuest noted.

However, full-tunnel configuration is not the default for VPNs, because it comes with “real trade-offs,” the researchers noted: It adds cost, latency, and bandwidth demands, since every packet has to travel through company infrastructure. Thus, forcing all traffic through the corporate backbone is “not always practical” for distributed or bandwidth-heavy workforces.

Enterprises should also enforce conditional access in Entra ID to block device-code authentication flow, which has few legitimate use cases for most users in most environments, ReliaQuest noted.

Additional precautions

The company also advised:

• Restricting Proxy Auto-Configuration (PAC) file retrieval to approved internal hosts;
• Disabling automatic Web Proxy Auto-Discovery (WPAD) via Group Policy to (this is often enabled by default in Windows);
• Deploying encrypted DNS such as DoH or DoT in strict mode as a “complement or alternative” to full-tunnel VPN. This is particularly important for organizations where always-on VPN is not feasible.
• Training employees to verify the URL and certificate of any page requesting credentials before entering them, particularly on public Wi-Fi networks.

Prevention is more important than detection here, ReliaQuest pointed out: while in tools like Microsoft Defender for Endpoint, ‘DnsConnectionInspected’ events showing queries to attacker-controlled domains are a primary endpoint-level signal, “by the time those events fire, the redirect has typically already occurred. In other words, endpoint telemetry confirms what happened more than it prevents it.”

This is exactly why methods like encrypted transport, Conditional Access, and WPAD and PAC hardening matter more than detection alone, the researchers emphasized.

This article originally appeared on CSOonline.

Traditional phishing techniques are in decline as a result of the disruption of the Tycoon2FA phishing-as-a-service (PHaaS) platform, Microsoft said in a new report, “Email threat landscape: Q2 2026 trends and insights”.

“Phishing volume linked to the platform fell 92% from pre-disruption averages, including QR code phishing and CAPTCHA-gated phishing both declining from their March highs,” the company wrote in the report.

The takedown reduced activity across multiple phishing categories, forcing attackers to shift to newer delivery methods.

Riding this shift in were a few notable phishing campaigns, including an automated business email compromise (BEC) campaign that reached 42,000 organizations in under three hours, and a multi-stage phishing campaign that used nested email (EML) files, calendar invitations, and a Microsoft authentication redirect to deliver malware.

To counter phishing attacks, Microsoft recommends blocking emails containing known bad URLs/ subject fields, enabling password-less authentication methods, or moving to MFA for accounts that still require passwords.

Tycoon2FA disruption sent attackers exploring

The take-down of Tycoon2FA forced its operators to abandon portions of their infrastructure and rework hosting, domain registrations, and delivery mechanisms.

“After falling 15% in March and another 22% in April, Tycoon2FA-linked phishing volume dropped 74% in May to just 1.5 million messages, then fell another 20% in June to 1.2 million, by far the lowest monthly volumes observed in at least a year,” Microsoft said.

The decline extended to QR Code lures and fake CAPTCHA pages, two phishing techniques in which Tycoon2FA accounted for 12% and 14% of industry activity in June, respectively. This indicated that the platform’s customer base had not been able to migrate to a replacement infrastructure.

But cutting off one head of the hacker hydra only gave rise to new tactics elsewhere.

The adaptation came in the form of using Microsoft Teams as a social engineering channel. Attackers established conversations to build trust before attempting credential theft or delivering malicious payloads. “Teams-based phishing volume climbed steadily throughout Q2, with the average number of detected attacks rising 19% from March to April, holding roughly flat into May (+1%), then increasing another 10% into June,” Microsoft said.

Microsoft also observed a highly automated BEC campaign that reached over 67,000 users using scripted emails, Amazon Simple Email Service (SES), and engagement tracking, alongside a separate phishing campaign targeting 107,000 users that abused Microsoft’s authentication flow and trusted cloud services, including Teams archive recording and ICS calendar invite, to disguise malware delivery behind legitimate infrastructure.

Phishing changes but the defense doesn’t

While QR Code and Captcha-based phishing attacks dropped significantly in the second quarter, business email compromise (BEC) charted jumped 121% between March and April, before dropping down again in May.

QR Code phishing represented 8.3 million attacks in June 2026, down from a peak of 18.7 million in March. Similarly, Captcha-gated phishing fell from 12 million attacks in March to 2.2 million in June.

BEC attacks hit 9 million in March, falling to 3.9 million in June.

But even as these phishing classics lost momentum and newer techniques emerged, Microsoft’s defensive advice remained rooted in the basics. It noted organizations should complement email filtering with phishing-resistant authentication such as passkeys and phishing-resistant MFA to reduce the effectiveness of credential theft campaigns.

The company also recommended strengthening Exchange Online Protection and Microsoft Defender for Office 365 with capabilities such as Safe links and Zero-hour Auto Purge (ZAP), in which malicious emails already delivered to mailboxes are removed before they are read, alongside enforcing password-less authentication methods like Windows Hello, FIDO keys, and Microsoft Authenticator.

Microsoft concluded its report with a list of indicators of compromise (IoCs) from the threats observed in the quarter to support detection efforts.

This article first appeared on CSO.

An intruder has breached the French government’s encrypted messaging service, Tchap, showing once again that human error is a weak spot in any security system.

Tchap was developed in France as an example of national sovereignty and was designed to be a more secure option than WhatsApp for communication between government employees.

In this case, it wasn’t the technology that was at fault, but a user: The intruder gained access to the system by taking over their account, according to DINUM, the French government’s interministerial digital directorate.

DINUM said it has blocked the affected user’s access and is investigating how much information has been revealed. While the system’s encryption was not broken, the intruder would have been able to view unencrypted public chat rooms accessible to the account taken over, potentially affecting 73,467 of the system’s 825,000 users, DINUM said.

That matches at least part of a post on X (formerly Twitter) reporting the intruder’s claim to have accessed the account of a Tchap user in the education sector through social engineering, exposing 73,467 user accounts, 643,459 messages, 876 chat rooms with message history, and 59,386 media files totalling 13.51 GB, including references to documents marked “Diffusion Restreinte” (restricted distribution).

DINUM said that it had reminded all Tchap users that public chat rooms are accessible to any user and are not encrypted, so all participants should refrain from any sensitive or confidential information.

This article first appeared on CSO.

Threat actors are continuing their onslaught against software supply chains, now with malware named after death itself.

The newly-discovered Hades Campaign is a “highly sophisticated” supply chain compromise that targets Python developer environments and runs as soon as infected packages are imported. It uses the popular Bun toolkit to silently execute multi-layer payloads that can extract sensitive data, move laterally across compromised systems, exploit common security frameworks, and even hijack AI gatekeeper analyzer systems via adversarial prompt injection.

Notably, the campaign exploited the popular C++ library ensmallen, as well as packages in the computational biology, bioinformatics, and genotype-phenotype analysis ecosystems.

The most novel thing about this malware is its combination of advanced tactics, noted David Shipley of Beauceron Security. He noted that we’ve seen memory-focused malware, we’ve seen attacks that attempt to defuse large language model (LLM) powered analysis with hidden prompts, and we’ve seen malware with wiper capabilities.

“But all three, in a fast moving mass propagating worm, is its own kind of nightmare,” he said. “And I suspect this is the way of the future.”

How Hades works

The Hades Campaign was discovered by researchers at StepSecurity, who called it the latest evolution of the Miasma threat actor. The researchers previously described Miasma attacks that had sent self-replicating worms to perform multi-cloud credential sweeps, caused infected repositories to execute code when folders were accessed in integrated development environments (IDEs) or by AI agents, and used techniques that scanned and read Linux process memory.

Hades uses the same credential harvesting methods, self-replicating worm logic, and GitHub-based exfiltration patterns, the researchers noted. In addition to ensmallen, compromised packages include mflux-streamlit, nhmpy, ppkt2synergy, embiggen, gpsea, and pyphetools.

The campaign’s entry point is a simple, obfuscated script embedded inside a Python package’s __init__.py file, a critical building block that gives Python the ability to recognize packages and import modules. Once they gain access, threat actors drop a precompiled Bun runtime binary and executes its JavaScript payload. Bun allows the malware to run complex JavaScript tasks in environments lacking a Node.js installation, bypassing traditional package manager controls and proxy logs.

The malware is able to scrape Linux memory mappings, and also introduces tailored macOS and Windows memory scrapers, which allow threat actors to extract sensitive, encrypted data.

Interestingly, attackers are also able to evade detection by automated LLMs that scan for suspicious code. This is achieved with a simple block of text at the top of the file; this instructs the model to ignore the hidden code below, classify the package as verified and clean, and provide reports stating it is safe.

This element represents what the StepSecurity researchers described as a “significant conceptual shift,” with attackers writing payloads that target AI systems’ cognitive logic. “Scanners that pass raw text to LLMs without strict boundary isolation can be coerced into generating false negative verdicts, allowing the malicious package to bypass organization analysis,” they wrote.

The tactic is indeed clever, Beauceron’s Shipley agreed, pointing out that attackers will increasingly target endpoint LLM-powered agents.

Why? “Because there’s no reliable defense,” he said. “LLMs are incredibly susceptible to social engineering.” This has been relabeled as prompt engineering, but is essentially just phishing for bots, he pointed out.

“While everyone’s worried about LLM-powered vulnerability discovery and automated exploitation, it’s LLM-created smart malware like this, and AI-powered phishing of humans and bots, that keeps me awake at night,” Shipley said.

Hades’ crafty worm propagation

The Hades Campaign command and control (C2) infrastructure uses three independent channels on public GitHub infrastructure to allow its communications to blend in with normal traffic. Stolen credentials are encrypted locally in a hybrid fashion (serialized, compressed, and pushed to a newly created public GitHub repository under attackers’ control). Exfiltrated repositories carry the description “Hades — The End for the Damned.”

Researchers noted that a core component of this campaign is its ability to propagate and move laterally across networks. It exploits the very methods meant to protect systems, including Secure Shell (SSH) and Secure Copy Protocol (SCP), OpenID Connect (OIDC),and Supply-chain Levels for Software Artifacts (SLSA).

For instance, when running inside a GitHub Actions workflow runner, the malware checks for OIDC variables, then bypasses registry signature policies and generates cryptographically signed SLSA provenance bundles via Sigstore. It can then fetch target libraries and inject the obfuscated script and JavaScript payload. From there, it can publish compromised versions to the Python Package Index (PyPI) repository and node package manager (npm) using the target’s credentials and the generated Sigstore bundle.

“This ensures that the published package appears to have valid, cryptographically verified build provenance from the organization’s official GitHub Actions build environment,” the researchers explained.

Further, if a harvested GitHub token has write permissions, the malware will target repositories to extract secrets using GitHub Actions runners. This occurs “directly from the runner’s address space without ever writing them to disk or making a suspicious network connection,” the researchers noted.

The malware also targets rule files and configuration directories for 14 different AI agents and systems, planting custom prompt instructions or executing hooks that trigger a bun run bootstrap command when the victim loads or consults the workspace with their AI assistant. Finally, it establishes persistence on the workstation and monitors for the presence of the stolen token; if that token is revoked, it executes a wiper process to erase the user’s files.

Microsoft has identified seven new failure modes in agentic AI systems, in addition to those it identified last year in its first Taxonomy of Failure Modes in Agentic AI Systems.

Four things contributed to the growing list of ways agentic AI can go wrong: the speed at which the technology went mainstream, the growing maturity of the Model Context Protocol (MCP) ecosystem, the rise of computer-use agents, and finally the gathering of more empirical evidence as researchers obtained more real-life findings.

The seven new failure modes it has identified are:

• Agentic Supply Chain Compromise —agent behavior can be affected by natural language rather than malicious code;
• Goal Hijacking — adversarial instructions appear aligned with legitimate task completion, while silently redirecting the agent’s terminal goal;
• Inter-Agent Trust Escalation —a compromised agent asserts false identity or inflates claimed permissions to an orchestrator;
• Computer Use Agent (CUA) Visual Attack — agents operating through graphical interfaces can be manipulated through content that carries adversarial instructions for the agent;
• Session Context Contamination —an adversary introduces data that biases the agent’s reasoning in subsequent steps, without triggering safety controls at any individual step;
• MCP / Plugin Abuse — an update on the original taxonomy’s coverage of function compromise around MCP and plugin protocols, specifically attack surfaces specific to those protocols;
• Capability / Architecture Disclosure —an agent reveals internal implementation details such as tool names and schemas, system-prompt structure, memory interfaces, or consent/human-in-the-loop trigger logic.

Microsoft advises security teams using these definitions to influence their planning to inventory their your supply chain, generating a software bill of materials (SBOM) for every deployed agent, to verify agent identity cryptographically, not positionally, by issuing attestable credentials at provisioning, to add the seven new failure modes to their red-team coverage matrix, and to audit the human-in-the-loop user experience as a security control.

Over the next three to five years, both governments and the private sector will need to rapidly adapt identification and mitigation protocols as adversaries move from AI-assisted to AI-enabled sanctions evasion and proliferation financing (PF), a new research paper warns.

The report, Algorithms of Evasion: The Rise of AI-Enabled Proliferation Financing, from the Royal United Services Institute (RUSI), a UK-based defense and security think tank, defines PF as the use of funds or financial services to acquire, develop or otherwise deal in weapons of mass destruction (WMD). It states, “North Korea and Iran are now developing and deploying AI models to aid with sanctions evasion activities.”

Key findings include the fact that AI is now capable of mass producing high-quality fraudulent documents, as well as automating what the report describes as “the administrative minutia of managing extensive shell company  networks.” AI powered systems, it states, can also “analyze blockchain patterns in real time to dynamically adjust cryptocurrency mixing strategies, effectively evading detection tools.”

In addition, it says, “[tools such as generative AI] which can produce sophisticated fraudulent identification documents, for example, have helped North Korea perpetrate phishing attacks against Western companies.”

Dr. Aaron Arnold, senior associate fellow with the Centre for Finance and Security at RUSI, who authored the paper, said in an email that what prompted it was an uptick over the last year in North Korea’s use of AI to facilitate and enhance its cyber operations, in the form of phishing schemes designed to generate revenue for the country’s ballistic missile and nuclear weapons programs.

He advised enterprise IT managers who need to protect their organizations from becoming victims of sanction evasion activities that “[it] means largely adapting to a landscape where traditional human-focused security boundaries are being bypassed by automated technologies.”

For IT managers, said Arnold, “this might entail incorporating defensive AI, the use of behavior-based analytics, using ‘circuit breakers’ when there is heavy use of API or MCPs, updating personnel training, and hardening identity verification, especially for any remote hiring.” 

Distinction between AI-assisted and AI-enabled activity is ‘central’

Sanchit Vir Gogia, chief analyst at Greyhound Research, said that the RUSI report matters “because it names the right structural shift. AI is not creating sanctions evasion from thin air, it is compressing and scaling methods that already work.”

He pointed out that none of the sanction-evading techniques such as fraudulent documents, synthetic identities, shell companies, hidden beneficial ownership, crypto laundering, and others are new. “What changes is the speed, quality, volume and coordination with which these methods can now be assembled,” he said.

According to Gogia, “the distinction between AI-assisted and AI-enabled activity is central. AI-assisted evasion uses AI for discrete tasks: writing a better email, producing a cleaner document, generating a stronger false profile, translating a pitch, summarizing regulations or preparing a plausible job application. AI-enabled evasion is more serious.”

A ‘structural asymmetry’

This tactic, he said, “begins to coordinate the system itself. It links identity, documents, ownership structures, payment routes, cloud access, crypto wallets, API calls and timing. The difference is not whether AI helps someone fake a document. The difference is whether AI begins to orchestrate the deception.”

That is why the report’s findings should worry enterprise leaders, he noted: “Many organizations still assume the bad actor is mostly human, mostly linear and mostly slow. That assumption is expiring. AI lets adversaries run more attempts, with fewer errors, across more channels, in more languages, with better paperwork and greater patience than most enterprise review processes can absorb. This is not a tale of genius criminals discovering magic. It is the story of ordinary controls meeting industrialized plausibility.”

The evidence today, he pointed out, is strongest around tactics such as identity fraud, document fraud, synthetic personas, remote-worker deception, phishing, social engineering, crypto obfuscation and workflow abuse. “Fully autonomous evasion networks sit on the horizon,” he said. “They are serious, but they are not yet the everyday baseline.”

This distinction matters, said Gogia: “If enterprises obsess over cinematic autonomous agent scenarios while leaving remote hiring, vendor onboarding, payment approvals, and document review full of holes, they will lose in the most prosaic way imaginable.”

The report, he said, also gets the “asymmetry” right. “Offensive actors can learn across the ecosystem,” he said. “They can scrape open information, reuse leaked records, study enforcement patterns, test onboarding forms, inspect public procurement data, watch court filings, probe compliance thresholds and [use the information to] refine their behavior.”

Defenders, by contrast, are hemmed in by privacy rules, fragmented data, explainability requirements, jurisdictional boundaries, conservative operating models and siloed technology estates. “Offensive AI learns broadly,” he said. “Defensive AI often learns from fragments. That is the structural asymmetry.”

He explained that the regulatory landscape also amplifies the problem, in that regulatory bodies “still speak in separate dialects. [For example] the EU AI Act pushes organizations toward stronger obligations for high-risk AI. NIST-style frameworks push risk management, transparency, and governance.”

A trust architecture problem

Financial Action Task Force (FATF) expectations push national risk assessment and counter-proliferation controls, he noted, while banking regulators focus on model risk, accountability and operational resilience. “None of these streams is irrelevant. The trouble is that criminals do not organize themselves around regulatory workstreams. They organize around outcomes.”

What that means, said Gogia, “is that enterprise cannot wait for a clean global rulebook. It will not arrive in time. CIOs, CISOs, compliance officers and boards need a working governance model now. They need privacy-preserving analytics, controlled data environments, audit trails, legal safeguards and clear model-risk accountability.”

He said that enterprise IT managers should treat the situation as a trust architecture problem rather than a narrow sanctions-screening problem. “The uncomfortable truth is that AI is not simply helping bad actors write better phishing emails or forge tidier documents,” he noted. “It is helping them manufacture legitimacy across a chain of enterprise workflows.”

Likely outcome an ‘AI arms race’

Report author Arnold also noted that there are signs that cyber criminals have discovered new AI technologies and abilities that legitimate enterprises could adopt for legitimate applications.

History, he said, “is replete with [criminals] developing novel solutions to tough problems, [which are] later adopted by law enforcement. Much of our anti-financial crime policy is effectively a response to bad actors exploiting systems or using technology in novel ways to perpetrate crimes. In this scenario, I think an ‘AI arms race’ between enforcement authorities and bad actors is the most likely outcome.”

Gogia added, “the baddies are not teaching enterprises how to invent AI. They are teaching enterprises where trust is leaking. That is the lesson worth taking seriously.”

This article originally appeared on CIO.com.