During China’s pseudo-cyber-hiatus, the PRC’s hacking operations get a major overhaul. CCP leadership moves responsibility away from the sloppy, brazen hackers at the People’s Liberation Army to the far more stealthy, and strategic, Ministry of State Security. Gone are the “most polite” hackers in the digital world. Here to stay are the gunslingers – the elite of the elite in their field. In Episode 6, host and former New York Times cybersecurity reporter, Nicole Perlroth lays out what it looked like as China’s hackers went underground… and what we missed in Eastern Europe as they did.
Chapter 1: What happened during China's cyber-hiatus?
For 18 months, a fragile calm descended on our digital borders. The CCP's hackers seemed to have just hung up their hats. And for a time, that giant whooshing noise of American IP being sucked back to China just stopped. All was quiet on the Eastern Front. Or so we thought.
In retrospect, it appears the PRC carefully studied the Snowden documents, got a look at the NSA's signals intelligence, and asked, how do we get that? Within months of the first leaks, Xi set up a standing cyber committee, one of a handful of committees that operates at the highest levels of the Chinese Communist Party.
Looking back now, it seems he charged it with mirroring and innovating upon the way the U.S. conducts its cyber operations. During its digital ceasefire, the PRC was actually busy consolidating disparate PLA hacking units under a new strategic support force, very similar to the Pentagon's own Cyber Command.
Chapter 2: How did the CCP restructure its hacking operations?
It moved responsibility for the country's most sensitive operations away from the smash-and-grab PLA to the stealthier and far more strategic Ministry of State Security, or MSS. Think of the MSS as a sort of combination of the FBI and NSA. It conducts espionage at home and abroad. But unlike the NSA, the MSS outsourced its sensitive operations to elite Chinese hackers all over the country.
Chapter 3: What does the Ministry of State Security do?
It set up front companies that usually marketed themselves as cybersecurity firms. But in reality, their only job was to carry out clandestine attacks for the MSS. In other cases, they paid or forcefully encouraged individual gunslingers, think top engineers at China's most successful tech companies or students at its universities, to hack the world's most valuable targets.
This infusion of new blood, new talent into the hacking pool meant more than just a shift in the chain of command. It meant a radical advance in skill and tactics. I'm Nicole Perleroth, and this is To Catch a Thief. These hackers were no longer blasting into the building and announcing their presence. Here's John Holquist, Mandiant's chief analyst.
They are now far more focused on their operational security, laying low, making it much more harder for us to attribute them.
Before 2015, attributing Chinese APTs by their attack style, whether phishing tactics or their malware, was a fairly straightforward practice. Rarely would you see a Chinese APT deploy advanced techniques or custom code. They barely tried to hide their tracks. By late 2016, it was a different story. Here's Kevin Mandia.
We used to be able to bucketize the forensics, Nicole, into very few groups out of China. And then all of a sudden we get an explosion. That's really it. Where the forensic evidence of each intrusion doesn't feel related to any other intrusion, or it's just different enough that we're like, ah, we're not quite sure if it's the same people.
There's just a dramatic increase in the volume of change, the pace of change on offense.
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Chapter 4: How did Chinese hackers evolve their tactics after 2015?
The first sign the game had changed is when I started getting tips about a spate of Chinese intrusions at aviation and aerospace companies in late 2016. Hackers weren't coming in the usual ways anymore. Instead of hacking their targets head-on, they were slipping in through a side door. They'd hacked the service providers that companies hire to manage their backend IT systems.
In industry parlance, these companies are known as MSPs, managed service providers. Breach one, and you get entry to potentially thousands of their customers. Some of these MSPs had names you've never heard of, but others, like IBM, you would definitely know. And the Chinese hackers doing this, they weren't one group working from one drab PLA building anymore.
This was a coordinated surge by disparate elite hackers. And unlike the PLA, these hackers weren't getting paid by the hour. They were getting paid by the outcome. Incident responders started getting frantic calls from MSPs all over the world seeking help. And these weren't just in the US. These were MSPs in Japan, South Korea, Thailand, all across Europe, Canada, the UK, South Africa, Australia.
They had all been popped in a campaign that they'd go on to call Operation Cloud Hopper because hackers would hop from these MSPs into their customer networks at some of the world's leading pharmaceuticals, engineering, retail, manufacturing, telecom, aerospace, and satellite technology makers. They took Rio Tinto's prospecting secrets and sensitive health research from Philips.
They took more than 100,000 detailed personnel records from the U.S. Navy. They even managed to slip into NASA's Jet Propulsion Lab. With the first Trump administration's trade war as a backdrop, they were back to hacking trade secrets with a vengeance. Here's Steve Stone, who lived and breathed this transition.
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Chapter 5: What is Operation Cloud Hopper?
The first love of mine in this was APT4. Most of my early times were really against APT4, which is largely publicly attributed to the People's Liberation Army. And they were exactly that. They were the checklist group, which I actually loved. They were going off a checklist. They did not seem very technically advanced.
And once we kind of learned the checklist, you could predict where their errors were going to be because it was an error in the checklist. They would hit the same glitches over and over again. And we were able to really understand that. And so I was very used to these PLA groups. And I thought I had this all kind of worked out.
And then we saw a very specific victim go through an initial compromise in a time span that I had never seen before. They moved through a layered network defense with some really novel technical countermeasures with virtually no problem. So right off the bat, we're like, they're problem solving on the fly. And that's incredibly impressive.
And then the other thing that really impressed me was they were really able to go after only what they needed to. They were only highly skilled when they absolutely needed to. And that ability to make that decision was the first really, I hate to say red flag, but the first big warning, like the game has changed.
These new hackers were meticulous digital ninjas working with a laser-like precision. They took great pains to cover their tracks, encrypting their traffic, deleting log files and other digital crumbs, and burrowing in so deeply that even when victims wiped and rebooted their machines, these Chinese hackers found a way to remain. But occasionally, they just couldn't help themselves.
At one point, they registered a hacking domain as NSAmefound.com. They were messing with us. Years later, we learned just how little they cared about getting caught. In 2024, someone, we still don't even know who, doxxed a mid-level Chinese hacker-for-hire contract shop called iSoon. Among the leaks were transcripts of hackers' group chats. They'd been messaging about who had been named in a U.S.
indictment of APT41, their hacking unit. But they weren't concerned. They were celebrating. The chats showed hackers promising to buy their colleagues 41 shots at the next rager. But for the most part, these MSS hackers laid low and were light years ahead of their predecessors.
When I'd interview the people charged with responding to these attacks, I couldn't help but notice that they were impressed.
It wasn't that they were always amazing. It's that they could be very low level and then a split second go all the way to the top of a technology stack and then immediately scale back down. They knew they did not want to reveal their wizardry and they knew they had it. And so they were able to really pay attention to that.
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Chapter 6: What are zero-day exploits and why are they valuable?
More zero days than ever before makes no sense to me when code was way less secure 30 years ago, 20 years ago, and 10 years ago than it is today. So we're building the most secure code we've ever built before, and yet there's more zero days than ever before.
We used to, and this sounds very bad now, but we used to actually like, you would know all the O-Days used by Chinese groups. There just weren't that many. You could, a really smart analyst could tell you all of them. And now, like, I couldn't tell you the ones they've used this month.
So there's clearly been a sea change here. But tell me what it looked like from your vantage point.
There's a whole different clip. So it's not like a group figured it out or the military didn't. That probably only happened because there's some kind of real direction. Your use of sea change is perfect. I think there's a real sea change. And in China, that only happens from the top down.
the top down. Really, in retrospect, what the CCP took from Washington's threats and the naming and shaming campaign wasn't to stop hacking, but to move it underground. And Zero Days offered the perfect cover. When nobody knows about the existence of your secret tunnel, you can move in and out as you please.
And part of the reason the CCP was suddenly so willing to burn so many zero days is that they had plenty of them to burn. And how they acquired their stash is just another window into the advantage authoritarians have in the digital realm. You see, here in the West, intelligence agencies have to develop zero days in-house or pay six, seven figures to procure them from hackers on the gray market.
That's not the case in China, where the CCP can simply force hackers to turn them over for free. And that's exactly what happened. Beijing started hoarding its own zero days, eliminating any above or below ground market for them in China. Authorities abruptly shuttered China's best known platform for reporting zero days.
They arrested its founder and they started forcing China's hackers to turn over their best finds. Here's Jim Lewis, longtime liaison on All Things China.
Chinese hackers complain to me. It's like, we could make a lot of money selling this stuff, and instead we have to give it to the government. And they're invited to drink tea at the local cop shop. Come down and drink tea. And it's suggested to them that it's their patriotic duty to give Uncle Xi their hacking tools for free. Or even to work for Uncle Xi. But...
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Chapter 7: How did the CCP acquire zero-day exploits?
kicking us off with Alibaba on deck. Now, Baba actually dropping today as Reuters reports the tech giant is cutting a third of its deals team as Chinese lawmakers step up their scrutiny. That's according to Reuters. The stock, as you can see, they're down about 5%.
In December 2021, a Chinese security engineer at Alibaba went rogue. He disclosed a serious zero-day that would have proved mighty useful to Chinese spies. What that Alibaba engineer found was a zero-day in an open-source library called Log4J. Here's Jenn Easterly, formerly the director of the U.S. Cyber Defense Agency, CISA.
The Log4j vulnerability is the most serious vulnerability that I've seen in my decades-long career. Everyone should assume that they are exposed and vulnerable
Now, this vulnerability became public last week when everyone found out about it, but it actually dates back to 2013 when this flaw was introduced into open source software that was then copied in millions of other places and has now sort of gone viral in a software sense.
Log4j was used in millions of applications. In terms of severity, this was a 10 out of 10. Hair on fire, drop everything and find a patch situation. Using this zero day, you could take full remote control of potentially millions of systems around the world. For cyber criminals, that meant you could have used it to steal banking credentials or deployed ransomware on God knows how many systems.
For spies, it would have made the digital world their oyster. In cybersecurity circles, what that Alibaba engineer did was heroic. But for Beijing, it was a slap in the face. And they made his employer pay a steep price, suspending Alibaba's government contracts for six months. Just long enough to send its stock in a free fall and send a clear message to every Chinese hacker and their employer.
Play by state rules or prepare to go through some things. By 2019, we caught glimpses of where all these zero days were going. That year, security researchers discovered a Chinese hacking operation that was as slick as any I'd seen. Just as a lion waits for its prey to come to water, Chinese hackers had pulled off what's known as a watering hole attack.
They'd infected a slew of Uyghur websites with a string of zero-day exploits. Anyone who navigated to these websites would have been immediately infected with spyware that turned their iPhone or Android phone into a CCP portal. These were zero days that on the gray market would have easily fetched $10 million. But Beijing was now getting them for free.
And not long after they turned up on Uyghur phones, researchers discovered a parallel effort hacking Tibetans and then Chinese activists. the five poisons. But inevitably, they turned up here, against us. China's zero days started popping up in our most widely used technology.
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Chapter 8: What challenges do hackers face in China?
Now, it's important to note here that this was a tad controversial, and there were many who screamed government overreach. But given the severity of China's attack, the potential for mass disruption, most privacy activists seemed to give the government a pass. And that attack, I'm sorry to say, was just the opening salvo. Here's Kevin Mandia.
China's brought the A game and they've changed. And usually when you see these kind of shift changes on offense, oh, their doctrine's changing. Something's changing over there. All I know is somebody made a decision to up them a notch. And we have a gradual incrementalism of aggression on offense out of China over the last few years. And it's going up every year.
They're no longer the most polite player in cyber.
Their techniques are far more innovative and improved than even three years ago. China is the winner in innovation. And you see what happens when they win. You get 75 zero days in a year.
So far, we've trained our eye across the Pacific, but as all this was going on, there was arguably a far more sinister disturbance in the digital world order. One that experts in industry and classified government skiffs were watching with horror.
officials are investigating if hackers carried out a nightmare scenario, taking down a power grid.
The CIA and security firms are investigating whether Russia is behind the cyber attack on a power grid in Ukraine. Russian hackers are stepping up attacks on behalf of the Putin regime.
When digital historians look back, there's no doubt that December 23rd, 2015 will go down as the day everything changed. That day, just ahead of Christmas Eve, Russian hackers crossed the digital Rubicon, shutting off power to Western Ukraine. And for good measure, they shut down emergency phone lines too. The power wasn't out long in Ukraine, less than six hours.
But it was just long enough to send a message. We can shut you down at any time of our choosing. They followed it up one year later with a second cyber attack on Ukraine's power grid. Only this time, they shut off power to the nation's heart, Kiev, in a display that made the White House wince. Until that point, covering these attacks was like watching an international game of chicken.
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