The seven-year-old Coreflood botnet is quietly stealing thousands of passwords from corporate users and other large organizations, thanks to recent enhancements that allow it to spread like a worm, researchers say.

The enhancements were revealed June 30 by botnet expert Joe Stewart, director of malware research at SecureWorks. Stewart traced the botnet to a single command and control server that held more than 400,000 user IDs, passwords, and other information. (See SecureWorks Finds Massive Cache of Stolen Data.)

Since then, other researchers have had an opportunity to evaluate Stewart's findings, and they don't like what they see. In a nutshell, Coreflood has combined its old ability to deliver a password-stealing Trojan with a new ability to infect whole Windows domains in a matter of hours.

"This is potentially way more malicious than Storm, because it is collecting passwords -- rather than just sending out spam or denying service -- and because the user doesn't have to click on a link or do anything at all in order to be infected," says David Jevans, CEO of security vendor IronKey and chairman of the Anti-Phishing Working Group.

Coreflood, which started out as a simple Trojan in late 2001, has been reiterated more than 100 times during its long lifespan. But with the enhancements, the Trojan now has the ability to infect Windows administrators' machines and then use their privileges to infect all of the other machines in the administrator's domain.

"We've literally seen situations where there was only one machine infected, and within a few hours, 30,000 other machines on the same network were also infected," Jevans says. "And these aren't random infections -- if it gets through to one administrator's machine, then all of the devices in his domain will be infected."

Coreflood can be shut off with an antivirus signature that prevents it from spreading. "The problem is that it's a password stealer," Jevans observes. "Most of the damage is done as soon as you're infected. It doesn't do much good to use a signature-based defense to shut it down hours or days later, after it's already got all your passwords."

Jevans is concerned that Coreflood will quickly become an attractive attack vector for cybercriminals, who want identity data from a highly qualified base of victims. "This is targeting corporate environments, which means there aren't any kids logging on to play Webkinz," he notes. "But a lot of adults access their bank accounts from the office."

The Coreflood vulnerability takes advantage of lax security practices in the Windows environment, where systems administrators often have broad rights to distribute software and other code, but whose authentication methods are simple, and even shared, Jevans observes. "And often, the domain administrator uses the same computer for surfing the Web that he does for sending out software," he notes. "It's relatively easy to find that one administrator who can infect a whole domain."

To defend themselves against Coreflood, enterprises should take a closer look at the way their Windows administrators operate, and which machines they use. Companies should also consider using anti-malware tools that are behavior-based, rather than signature-based, Jevans says.

Enterprises should also consider using anti-malware strategies that employ virtual machines, protecting the original operating system from attack, Jevans suggests. Azure, the hardware-based tool scheduled to be released next month by researchers at Damballa, is a good example of the way next-generation malware defenses might work, he says. (See Researcher Offers Malware Analysis Tool.)

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