Who Stole 3.6M Tax Information from South Carolina? – Krebs on Safety

For practically a dozen years, residents of South Carolina have been stored at the hours of darkness by state and federal investigators over who was answerable for hacking into the state’s income division in 2012 and stealing tax and checking account info for 3.6 million individuals. The reply could now not be a thriller: KrebsOnSecurity discovered compelling clues suggesting the intrusion was carried out by the identical Russian hacking crew that stole of thousands and thousands of fee card information from massive field retailers like Dwelling Depot and Goal within the years that adopted.

Questions on who stole tax and monetary information on roughly three quarters of all South Carolina residents got here to the fore final week on the affirmation listening to of Mark Keel, who was appointed in 2011 by Gov. Nikki Haley to move the state’s regulation enforcement division. If permitted, this is able to be Keel’s third six-year time period in that function.

The Related Press reports that Keel was cautious to not launch many particulars in regards to the breach at his listening to, telling lawmakers he is aware of who did it however that he wasn’t prepared to call anybody.

“I feel the truth that we didn’t provide you with an entire lot of individuals’s info that obtained breached is a testomony to the work that individuals have performed on this case,” Keel asserted.

A ten-year retrospective revealed in 2022 by The Publish and Courier in Columbia, S.C. stated investigators decided the breach started on Aug. 13, 2012, after a state IT contractor clicked a malicious hyperlink in an electronic mail. State officers stated they discovered in regards to the hack from federal regulation enforcement on October 10, 2012.

KrebsOnSecurity examined posts throughout dozens of cybercrime boards round that point, and located just one occasion of somebody promoting giant volumes of tax information within the yr surrounding the breach date.

On Oct. 7, 2012 — three days earlier than South Carolina officers say they first realized of the intrusion — a infamous cybercriminal who goes by the deal with “Rescator” marketed the sale of “a database of the tax division of one of many states.”

“Checking account info, SSN and all different info,” Rescator’s gross sales thread on the Russian-language crime discussion board Embargo learn. “If you are going to buy all the database, I offers you entry to it.”

Per week later, Rescator posted the same provide on the unique Russian discussion board Mazafaka, saying he was promoting info from a U.S. state tax database, with out naming the state. Rescator stated the info uncovered included Social Safety Quantity (SSN), employer, title, deal with, telephone, taxable revenue, tax refund quantity, and checking account quantity.

“There’s numerous info, I’m able to promote all the database, with entry to the database, and in components,” Rescator instructed Mazafaka members. “There’s additionally info on company taxpayers.”

On Oct. 26, 2012, the state introduced the breach publicly. State officers stated they had been working with investigators from the U.S. Secret Service and digital forensics specialists from Mandiant, which produced an incident report (PDF) that was later revealed by South Carolina Dept. of Income. KrebsOnSecurity sought remark from the Secret Service, South Carolina prosecutors, and Mr. Keel’s workplace. This story will probably be up to date if any of them reply. Replace: The Secret Service declined to remark.

On Nov. 18, 2012, Rescator instructed fellow denizens of the discussion board Verified he was promoting a database of 65,000 information with checking account info from a number of smaller, regional monetary establishments. Rescator’s gross sales thread on Verified listed greater than a dozen database fields, together with account quantity, title, deal with, telephone, tax ID, date of beginning, employer and occupation.

Requested to offer extra context in regards to the database on the market, Rescator instructed discussion board members the database included monetary information associated to tax filings of a U.S. state. Rescator added that there was a second database of round 80,000 firms that included social safety numbers, names and addresses, however no monetary info.

The AP says South Carolina paid $12 million to Experian for identification theft safety and credit score monitoring for its residents after the breach.

“On the time, it was one of many largest breaches in U.S. historical past however has since been surpassed enormously by hacks to Equifax, Yahoo, Dwelling Depot, Goal and PlayStation,” the AP’s Jeffrey Collins wrote.

Because it occurs, Rescator’s legal hacking crew was straight answerable for the 2013 breach at Goal and the 2014 hack of Dwelling Depot. The Goal intrusion noticed Rescator’s cybercrime outlets promoting roughly 40 million stolen fee playing cards, and 56 million playing cards from Dwelling Depot prospects.

Who’s Rescator? On Dec. 14, 2023, KrebsOnSecurity revealed the outcomes of a 10-year investigation into the identification of Rescator, a.ok.a. Mikhail Borisovich Shefel, a 36-year-old who lives in Moscow and who just lately modified his final title to Lenin.

Mr. Keel’s assertion that someway the efforts of South Carolina officers following the breach could have lessened its impression on residents appears unlikely. The stolen tax and monetary information seems to have been bought brazenly on cybercrime boards by one of many Russian underground’s most aggressive and profitable hacking crews.

Whereas there aren’t any indications from reviewing discussion board posts that Rescator ever bought the info, his gross sales threads got here at a time when the incidence of tax refund fraud was skyrocketing.

Tax-related identification theft happens when somebody makes use of a stolen identification and SSN to file a tax return in that individual’s title claiming a fraudulent refund. Victims normally first be taught of the crime after having their returns rejected as a result of scammers beat them to it. Even those that usually are not required to file a return may be victims of refund fraud, as can those that usually are not really owed a refund from the U.S. Inner Income Service (IRS).

In response to a 2013 report from the Treasury Inspector Normal’s workplace, the IRS issued practically $4 billion in bogus tax refunds in 2012, and greater than $5.8 billion in 2013. The cash largely was despatched to individuals who stole SSNs and different info on U.S. residents, after which filed fraudulent tax returns on these people claiming a big refund however at a special deal with.

It stays unclear why Shefel has by no means been formally implicated within the breaches at Goal, Dwelling Depot, or in South Carolina. It could be that Shefel has been indicted, and that these indictments stay sealed for some motive. Maybe prosecutors had been hoping Shefel would determine to depart Russia, at which level it will be simpler to apprehend him if he believed nobody was on the lookout for him.

However all indicators are that Shefel is deeply rooted in Russia, and has no plans to depart. In January 2024, authorities in Australia, the US and the U.Okay. levied monetary sanctions in opposition to 33-year-old Russian man Aleksandr Ermakov for allegedly stealing information on 10 million prospects of the Australian medical health insurance big Medibank.

Per week after these sanctions had been put in place, KrebsOnSecurity revealed a deep dive on Ermakov, which discovered that he co-ran a Moscow-based IT safety consulting enterprise together with Mikhail Shefel referred to as Shtazi-IT.

A Google-translated model of Shtazi dot ru. Picture: Archive.org.