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This report is part of the RAND Corporation research report series. RAND reports present research findings and objective analysis that address the challenges facing the public and private sectors. All RAND reports undergo rigorous peer review to ensure high standards for research quality and objectivity.

Lillian Ablon, Martin C. Libicki, Andrea A. Golay Markets for Cybercrime Tools and Stolen Data Hackers’ Bazaar C O R P O R A T I O N

NATIONAL SECURITY RESEARCH DIVISION Markets for Cybercrime Tools and Stolen Data Hackers’ Bazaar Lillian Ablon, Martin C. Libicki, Andrea A. Golay Sponsored by Juniper Networks

The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND’s publications do not necessarily reflect the opinions of its research clients and sponsors. Support RAND— make a tax-deductible charitable contribution at www.rand.org/giving/contribute.html R® is a registered trademark. © Copyright 2014 RAND Corporation This document and trademark(

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iii Preface Markets are good because they facilitate economic efficiency, but when that efficiency facili - tates criminal activity, such “black markets” can be deemed harmful. Criminal activities in cyberspace are increasingly facilitated by burgeoning black markets in both the tools (e.g., exploit kits) and the take (e.g., credit card information). As with most things, intent is what can make something criminal or legitimate, and there are cases where goods or services can be used for altruistic or malicious purposes (e.g., bulletproof hosting and zero-day vulnerabilities).

This report describes the fundamental characteristics of these markets and how they have grown into their current state in order to give insight into how their existence can harm the information security environment. Understanding the current and predicted landscape for these markets lays the groundwork for follow-on exploration of options that could minimize the potentially harmful influence these markets impart. This report assumes the reader has a basic understanding of the cyber, criminal, and economic domains, but includes a glossary to supplement any gaps.

This report should be of interest to cybersecurity, information security, and law enforce- ment communities. It was sponsored by Juniper Networks as part of a multiphase study on the future security environment. This research was conducted within the Acquisition and Technology Policy (ATP) Center of the RAND National Security Research Division (NSRD).

NSRD conducts research and analysis on defense and national security topics for the U.S. and allied defense, foreign policy, homeland security, and intelligence communities and foundations and other nongovernmental organizations that support defense and national security analysis. For more information on the ATP Center, see http://www.rand.org/nsrd/ndri/centers/atp. html or contact the director (contact information is provided on the web page).

Comments or questions on this report should be addressed to the lead author, Lillian Ablon, at Lily_Ablon@rand.org, or the project leader, Martin Libicki, at Martin_Libicki@rand.org.

v Contents Preface ........................................................................................................... iii Figures and Tables ............................................................................................. vii

Summary ........................................................................................................ ix Acknowledgments ............................................................................................ xiii Abbreviations ................................................................................................... xv Ch APT er One Introduction and r esea rch Methodology .................................................................. 1 Ch APT er Tw O Characteristics of the Black Market ......................................................................... 3 Structure .......................................................................................................... 4 Participants ....................................................................................................... 5 Business Conduits ................................................................................................ 7 Language ........................................................................................................ 8 Products .......................................................................................................... 8 Pricing ............................................................................................................ 11 Reliability and Integrity ........................................................................................ 15 Sensitivity to External Events .................................................................................. 17 Resilience ......................................................................................................... 17 Ch APT er Three The Black Market and Botnets .............................................................................. 21 Sophistication ................................................................................................... 22 Cost Trends Over Time ....................................................................................... 23 Ch APT er F Our Zero-Day Vulnerabilities in the Black and Gray Markets ............................................. 25 Participants and Structure ..................................................................................... 25 Prices ............................................................................................................. 26 Trends for the Zero-Day Market ............................................................................. 27 Ch APT er F IV e Are h acker Black Markets Mature? ........................................................................ 29

vi Markets for Cybercrime Tools and Stolen Information: Hackers’ Bazaar Ch APT er S Ix Projections and Predictions for the Black Market ...................................................... 31 Most-Agreed-Upon Projections and Predictions ............................................................ 31 Agreed-Upon Projections and Predictions for Shifts in Targets .......................................... 34 Agreed-Upon Projections and Predictions for Shifts in Attack Characteristics ........................ 34 Agreed-Upon Projections and Predictions for Shifts in Participants...................................... 35 Contested Projections and Predictions ....................................................................... 35 Ch APT er Se Ven Conclusions ..................................................................................................... 39 Ch APT er eIG h T For Future r esea rch ........................................................................................... 41 APPen DIx e S A.

Text of the Black Market Timeline .................................................................... 43 B. Glossary ...................................................................................................... 47 Bibliography .................................................................................................... 53 Selected Interviews and Personal Communications ........................................................ 65

vii Figures and Tables Figures 2.1. Different Levels of Participants in the Underground Market ................................. 6 2.2. Esti mate of Various Channels and Tiers Used by Participants ............................... 9 2.3. Prol iferation and Variety of Exploit Kits Over Time (non-cumulative) ..................... 14 3.1. Botne t Timeline .................................................................................... 21 6.1. Blac k Market Timeline ............................................................................ 32 6.2.

Hack ing Data Breaches by Size ................................................................. 36 6.3. Atta ck Sophistication versus Intruder Technical Knowledge ................................. 37 A.1. Numb er of New ZeuS Variants (January 2007–February 2010) ............................ 45 Tables 2.1. Goods and Services on the Black Market ....................................................... 10 2.2. Expl oit Kit Prices Over Time .................................................................... 13 2.3.

Prol iferation and Variety of Exploit Kits Over Time (non-cumulative) ................................................................................... 14 2.4. Cred it Card Prices Based on Market Circumstance ........................................... 15 4.1. Zero -Day Prices Over Time ..................................................................... 27 5.1. Char acteristics of Maturity ...................................................................... 30

ix

Summary Black and gray markets for hacking tools, hacking services, and the fruits of hacking are gain- ing widespread attention as more attacks and attack mechanisms are linked in one way or another to such markets. In the December 2013 breach of the retail giant Target, where data from as many as 40 million credit cards and 70 million user accounts were hijacked, such data appeared within days on black-market sites.

Other examples of attacks and their links to underground markets include • recent increases in the use of watering-hole attacks (where users visit popular, legitimate, but compromised websites) based on well-known exploit kits available for sale on the black market (see, e.g., Malwageddon, 2013) • the growing prevalence of malware inserted into online advertisements that, when clicked, infect a victim’s computer, and call back to an exploit kit to launch additional malware; data is then stolen and sold on black markets (e.g., Joostbijl, 2014) • websites throttled by Distributed Denial of Service (DDoS) attacks implemented by rented botnets available on the black market (e.g., Schwartz, 2010).

These black markets are growing in size and complexity. The hacker market—once a varied landscape of discrete, ad hoc networks of individuals initially motivated by little more than ego and notoriety—has emerged as a playground of financially driven, highly organized, and sophisticated groups. In certain respects, the black market can be more profitable than the illegal drug trade; the links to end-users are more direct, and because worldwide distribution is accomplished electronically, the requirements are negligible.

Understanding this market in its entirety is complicated by the fact that it is geographi - cally spread out, diverse, segmented, and usually hidden under the cloak of darknets (e.g., Tor), anonymization, and cryptographic features. What can be surmised from interviews with expert observers is that the hacker market poses a formidable challenge and an increasing threat to businesses, governments, and individuals operating in the digital world. Increasing sophistication and specialization characterizes both how the market operates and the types of goods and services being sold.

As with any other market, products and ven - dors tend to be reliable; but the unwary can be scammed or sold products with unwanted fea- tures. Methods for communication have gotten more innovative and secure: there is greater use of encryption and privacy mechanisms, such as off-the-record messaging and digital and cryptocurrencies. Organization of groups and forums are highly structured, and specialization of roles and responsibilities is common. Vendors often guarantee their products’ lifespan or

x Markets for Cybercrime Tools and Stolen Information: Hackers’ Bazaar value, and some track what a customer does with their product—a hacker’s version of “digital rights management.” There has been a steady increase in the availability of goods and services offered, from stolen records and exploit kits to “stolen-to-order” goods, such as intellectual property and zero-day (more commonly, half-day) vulnerabilities. Greater availability of as-a-service models, point-and-click tools, and easy-to-find online tutorials makes it easier for technical novices to use what these markets have to offer.

Despite these markets being generally illicit, they follow the same economic laws and practices as other markets: Participants communicate through various channels, place their orders, and get products. Black-market evolution mirrors the normal evolution of a free market, with both innovation and growth. Prices for credit cards, for example, are falling because the market is flooded with records, and botnets and DDoS capabilities are cheaper because so many more options are available. Access to such markets, conversely, is getting tighter.

Motivated, in part, by recent black market takedowns, more sophisticated markets are undertaking more rigorous and aggres - sive vetting of individuals. More transactions are taking place on virtual private networks and darknets, with anonymization and encryption capabilities enabled. Despite increased efforts by law enforcement to disrupt and shut down various parts of the market—from its financing to popular marketplaces—the hacker economy has proved to be quite resilient. The market bounces back after a takedown or arrest.

Finding comparable replacements for market leaders like the Blackhole Exploit Kit or the Silk Road may take a few iterations, but substitutes appear almost immediately as competing forums constantly vie for market share. That said, law enforcement is getting better for a number of reasons: More indi- viduals are technologically savvy; suspects are going after bigger targets, and thus are attracting more attention; and more crimes involve a digital component, giving law enforcement more opportunities to encounter crime in cyberspace.

Adding to the complexity for defenders are the rapidly emerging and highly secretive markets for zero-day vulnerabilities, which occur in both gray (licit) and black (illicit) mar - kets. Discussions surrounding zero-days have risen in prominence because of increased media attention and recent decisions by many software makers to pay for discoveries of such vulner- abilities. Ironically, sources of information that were once forthcoming have gone silent of late. Noteworthy Projections and Predictions Since the mid-2000s, the hacking community has been steadily growing and maturing, as has its market.

It took more than a decade of continuous development and innovation, the intro- duction of new generations of digitally savvy participants, and significant trial and error to achieve today’s landscape, in which experts agree on the following projections and predictions: • There will be more activity in darknets, more checking and vetting of participants, more use of cryptocurrencies, greater anonymity capabilities in malware, and more attention to encrypting and protecting communications and transactions. • Helped by such markets, the ability to attack will likely outpace the ability to defend. • Hyperconnectivity will create more points of presence for attack and exploitation, so that crime will increasingly have a networked or cyber component, creating a wider range of opportunities for black markets.

Summary xi • Exploitation of social networks and mobile devices will continue to grow. • There will be more hacking for hire, as-a-service offerings, and brokers. Experts disagree, however, on who will be most affected by the growth of the black market (e.g., small or large businesses, individuals), what products will be on the rise (e.g., fungible goods, such as data records and credit card information; nonfungible goods, such as intellectual property), or which types of attacks will be most prevalent (e.g., persistent, targeted attacks; opportunistic, mass “smash-and-grab” attacks).

For Further Research The harmful effects of black markets on cybersecurity suggest the need for options to sup - press such market activity—without which, very little is likely to change. The search for such options raises several questions. How should security technologies and law enforcement shift their approaches to thwart the rise of the markets? How might bug bounty programs or better pay and incentives from legitimate companies shift transactions and talent off the illicit mar - kets into legitimate business operations?

Would it be worthwhile to establish fake credit card shops, fake forums, and sites for counterfeit goods that would flood the market with fake items? Would more vigorous law enforcement help? Would international cooperation be required to put muscle behind today’s law enforcement? Should there be mandates for encryption on point-of-sale terminals, safer and stronger storage of passwords and user credentials, implemen- tation of “chip and PIN” (personal identification number) in the United States? If companies do not comply, would making them liable for data breaches decrease activity on the markets?

Such questions are candidates for further research.

xiii Acknowledgments RAND reports typically draw on a wide collection of supporters, collaborators, and helpers in their creation. We would first like to mention the invaluable insights provided by the numer- ous security experts at Juniper Networks. Within RAND, Cynthia Cook and Henry Willis have been wise and patient in their assistance and insight to this project. Our reviewers, Ed Balkovich and Igor Mikolic-Torreira, offered sage advice that improved the report. Jerry Sollinger gave generously of his time to help format and edit multiple drafts.

Finally, we are exceptionally grateful to all those who took the time to share their knowl- edge of black and gray markets, including those who offered their wisdom anonymously and those mentioned in the bibliography.

xv Abbreviations DDoS Distributed Denial of Service GPG GNU Privacy Guard I2P Invisible Internet Project IP intellectual property IRC Internet Relay Chat P2P peer-to-peer PHI protected health information PII personally identifiable information PIN personal identification number R&D research and development SMS Short Message Service VPN virtual private network

CHapTer One Introduction and Research Methodology Markets tend to make activities more efficient, whether such activities are laudable or criminal (or, at least, subterranean). The world of hacking can be seen as a market: Buyers seek the best price; sellers ply their wares or skills to make the most profit. This scenario is subject to typical market forces, with prices rising when demand is high and falling when it is low. Over time, good products squeeze out bad ones, and high-quality brands can command premium prices.

Mergers and acquisitions occur, and deals get made between market participants who know and trust each other. Innovation is constant, and new products thrive or wither depending on the judgment of the market. Over the last ten to 15 years, an activity that had typically been carried out by individuals working alone has evolved to one done by organizations and aided by the exchange of goods and services among organizations and individuals.

To the extent that such exchanges increase the efficiency of computer network attack and exploitation, they multiply the challenges faced by companies, governments, and others with information to steal. During the busy 2013 holiday shopping season, point-of-sale terminals at retail giant Target were infected by malicious hackers, resulting in the compromise of at least 70 million customer records, including customer names, debit and credit card numbers, expiration dates, and security codes. Within days, these customer records started to appear on underground forums—or hacker black markets.

This is just one of many data breaches with the intent to sell the spoils on the black market, and is a timely reminder that the market for stolen infor - mation is very much alive and thriving, as is the market for the services used to obtain that information. Our goal in investigating such markets was to understand their character and the trends in their development. In doing so, we separate what we call black markets from gray ones, although such markets may overlap.

Black markets are organized and run for the purpose of cybercrime; 1 they deal in exploit kits, botnets, Distributed Denial of Service (DDoS), attack services, and the fruits of crime (e.g., stolen credit card numbers, compromised hosts).

Gray markets, by our definition, are limited to the exchange of vulnerabilities and exploits, the dis- covery and development of which are not illegal per se (legitimate companies, for instance, often pay for information about vulnerabilities in their own products), but can nevertheless be 1 One way to subdivide cybercriminals with varying intent is as follows: • individuals or small groups: intent is for financial gain • organized criminals: intent is for financial gain • nation-states: intent is to monitor, exploit, or attack threats • cyberterrorists: intent is to degrade, destroy, disrupt, deny, or deceive • hactivists: intent is for notoriety or visibility.

2 Markets for Cybercrime Tools and Stolen Information: Hackers’ Bazaar troubling because they also complicate the life of system defenders. As more news and reports cover this topic, gray markets and transactions have become more acceptable, although contro- versy remains (e.g., Egelman, 2013). We conducted this research primarily through more than two dozen interviews with subject-matter experts, carried out between October and December 2013. These experts included academics, security researchers, reporters, security vendors, and law enforcement, each bringing a unique perspective.

We identified these experts through a variety of methods: Some had written reports, papers, or articles, given talks or presentations on the topic; others were individuals with whom we had a personal connection and who had experience in this realm; some were contacts provided by our sponsor. Additionally, some interviewees referred us to other experts. In all, we received approximately a 35-percent response rate. Although we sought details, we could not avoid generalities.

Many experts did not want to give details lest they interfere with ongoing investigations, alert criminals to what the secu- rity industry knows, compromise current clients of security vendors, or provide a “how-to handbook” for getting involved in the black market. Almost a quarter of the experts spoke on condition of anonymity. Where appropriate, we distinguish which views are held by multiple experts or just one. Secondarily, we reviewed literature related to this topic, including news articles, confer - ence talks, books, and reports. The bibliography provides a full listing.

The results are suggestive, but the nature of the market means they are not definitive. Criminals try to hide what they do; their markets are clandestine by nature, and statistics on them are imprecise. Experts can disagree even on very basic points. With such caveats in mind, we start with black markets. We review their primary char - acteristics: their structure, operating conduits, participants, products, and pricing. We also discuss the role that reliability and integrity play, and the markets’ sensitivity to external events and resilience.

We then touch on two special areas of interest: botnets and zero-day vulner - abilities. The former is one of the largest enablers of cybercrime, while the latter has a place in both black and gray markets, and has gotten increased attention lately. We then focus on indi- cators of the maturity of the black market, and what are seen as the most likely and noteworthy projections and predictions.

We end with our conclusions, and include an appendix showing a timeline of relevant events leading to the current market, as well as a glossary of terms to supplement the reader’s understanding of the cyber, criminal, and economic domains.

CHapTer Tw O Characteristics of the Black Market Black markets emerged as it became increasingly obvious that a lot of money could be made for relatively low investment. The growth of the Internet allowed like-minded individuals to find each other and connect more easily, providing easier access to tools and weapons, as well as to more targets. Barriers to entry were low for those with appropriate access and vetting. The risk was also low (compared with other criminal markets), at least initially, because law enforce- ment was ill equipped to track it (although they are increasingly getting more effective).

The slow adaptation of law to the demands of cyberspace has made for a difficult (and often slow) fight for law enforcement. 1 The black market is not so much a market as it is a collection of activities that range from simple to extremely sophisticated and operate all over the world, from New Jersey to Nigeria to China and Southeast Asia. Goods and services tend to be reliable (though not always), and implementation and transactions are quick and efficient.

These markets are compared by some to underground markets for other illicit goods, such as drugs, with the difference that digital goods carry less risk and can offer greater profit. When we say market(s), we mean the collection of (skilled and unskilled) suppliers, ven - dors, potential buyers, and intermediaries for goods or services surrounding digitally based crimes. 2 A marketplace is the location in which a market operates—in our case, it is typically virtual or digital. It is challenging to describe what the entire market looks like.

It is too vast, has too many players, is too disjointed, is constantly changing, and, because it is a criminal market, pains are taken to prevent law enforcement from understanding it. People often only have a good handle on their own niche, geography, or product. The remainder of this

section delves into the various components of the black market (structure, participants, operating conduits, products, pricing) and provides some commentary on the market’s reliability and integrity, sensitivity to external events, and resilience to takedowns.

We will paint as encompassing a picture as pos - sible, given the scarcity of available details. 1 Take, for example, the case of sentencing a high-ranking member of CarderPlanet—almost a decade after his arrest (Farivar, 2013). 2 A few of these crimes include financial (e.g., account compromise, account credentials, credit card data), nonfinancial (e.g., credentials for eCommerce, social media, gaming), intellectual property (IP) theft, counterfeit goods, defamation, or takedown of sites.

4 Markets for Cybercrime Tools and Stolen Information: Hackers’ Bazaar Structure Hacker markets have evolved over time and now come in many forms. In the early to mid- 2000s, they focused on goods and services surrounding credit card data. Then, they expanded to broker credentials for eCommerce accounts, social media, and beyond. These days, some are still dedicated to one product or a specialized service, while others offer a range of goods and services for a full lifecycle of an attack; some are “storefronts” that offer many products but not complete one-stop shopping.

Some vendors advertise on multiple marketplaces; others stick to just a few online forums. Even within single forums or stores, there are different tiers of access for various products. Some underground organizations can reportedly reach 70,000–80,000 people, with a global footprint that brings in hundreds of millions of dollars (e.g., carder.su, a now-defunct forum that was dedicated to all aspects of credit card fraud).

These market - places—particularly the harder-to-access tiers where participants are highly vetted—are often well structured and policed, with their own constitution-like rules and guidelines to follow. That said, plenty of the market does not have rules and regulations—one reason experts say the black market can outpace the legitimate world. Criminals of multiple skill levels can participate in the black market because targets vary in their hardness (as far as stealing data is concerned, some say individuals tend to be softer or easier targets than organizations).

Most players go after any exploitable device, employing “smash-and-grab” techniques, using goods acquired in the more easily accessible channels. Fewer players are good enough to target specific systems, companies, or victims. 3 These more sophisticated, more focused attackers require access to higher tiers or to in-house research and development (R&

D) for the most advanced tools and expertise. Those who would carry out targeted attacks may explore peer-to-peer solicitations rather than the more open public forums or chat channels to acquire their desired goods and services. But players of various skill levels often support one another. For example, highly skilled players, through a breach, may capture IP along with data or account credentials. They may then sell the IP to those who deal in cor- porate espionage, and the data and credentials to other, potentially less-skilled individuals for further exploitation and sale.

But almost any computer-literate person can enter the market. With the increase of as- a-service models and do-it-yourself kits (with easy-to-use administration panels), anyone can create and use variants of similar malware. One can buy credentials, credit cards, and person - ally identifiable information (PII) without needing to be highly technical. This is increasingly true for those involved in identity theft.

One expert estimates that in the mid-2000s, approximately 80 percent of black-market participants were freelance (the rest being part of criminal organizations or groups), but has declined and is closer to 20 percent today. 4 These freelancers span markets and tiers of vary - ing access. But while an individual is good at one thing, organizations (or well-coordinated 3 One expert suggested that true targeted attacks are about 5 percent of the market, and the remaining 95 percent are consumer-grade.

Although this breakdown has been consistent through time, the whole market is growing exponentially. 4 Another estimate breaks down the market thusly: • 70 percent individuals or small groups • 20 percent criminal organizations • 5 percent cyberterrorists • 4 percent state-sponsored players • 1 percent hacktivists (“pseudo cyberarmies,” not Anonymous)

Characteristics of the Black Market 5 groups of individuals) can combine many different skill sets to accomplish bigger goals with bigger returns. Thus, there has been a tendency for these organizations to grow, as individuals coalesce into bigger groups over time, albeit with exceptions. Participants Consistent with traditional economies, the underground market comprises sellers (supply), buyers (demand), and intermediaries (Ramzan, 2013). Buyers take many forms: individuals, criminal organizations, commercial vendors.

Intermediaries can act as a third party to verify and validate both products and participants; they can facilitate transactions and safeguard identities by acting as a middleman or a fence. Participants also occupy different levels in the hierarchy of the marketplace, and those at the higher levels typically receive higher compen - sation. Moving up into the higher and harder-to-access tiers of the market requires extensive vetting that can hinge on personal relationships.

Within these markets, there are often hierarchies and specialized roles: administrators sit at the top, followed by subject-matter experts who have sophisticated knowledge of particular areas (e.g., root kit creators, data traffickers, cryptanalysts, those who vet). Next are intermedi- aries, brokers, and vendors, and then the general membership. Each member can have a subsid- iary cell of associated members. Ultimately, there needs to be a cash-out. This is where mules and virtual money mule ser- vices come into play.

They are the ones who use multiple ways to turn the stolen credit card or eCommerce accounts into usable money: e.g., completing wire transfers, shipping goods over- seas bought with stolen funds. Mules can be witting participants (well-informed and organized operations), or unwitting (naïve individuals duped into involvement). How well players fare depends on their role in the hierarchy, what they sell, their reputa- tion, and their skill level. There is little consensus on which of these factors makes the biggest difference.

In general, those higher up in the hierarchy (especially of the card and data rings) are the best rewarded. Similarly, the closer one is to the cash, the more money can be made. One expert noted that witting mules are the “linchpin” of the system, as they tend to be closest to turning “the take” of an attack into actual disbursements of money. Thus, participating as a mule can be lucrative. Figure 2.1 depicts the different participant levels in the underground market, proportion- ally. It also shows the sophistication and skill levels, and gives examples of various roles.

No one knows (or is willing to hazard a guess) how many people participate in this market. Similarly, few want to estimate how large the market is, although the general feeling is that it is large, and one expert noted that it generates billions of dollars, at the least. The number of people participating in the market is likely to increase because it is easier to get involved than it was ten years ago. This is due to the greater proliferation of websites, forums, and chat channels where goods can be bought and sold.

An increase in the number of YouTube videos and Google guides for “how to use exploit kit X” or “where to buy credit cards” also facilitates entry into the lower tiers, especially for those who wish to be buyers. Sophistica- tion will continue to rise: Wherever there is a necessity to exploit data (whether it be financial, IP, or something else) there will be highly skilled individuals selling their services. As a result, it is believed that the number of participants, particularly highly skilled ones, has risen sharply

6 Markets for Cybercrime Tools and Stolen Information: Hackers’ Bazaar in recent years, along with the variety of services offered. The level of difficulty and skill also depends on the target: In general, consumers are an easier target than organizations. As is the case in any market, success for sellers often requires differentiating their product from others. Those who wish to sell hard-to-get, nonfungible goods often require that transac- tions be done in secrecy, with “double blind” auctions and the use of multiple layers to evade law enforcement.

Although there is a lower barrier to entry for the easier-to-access tiers, getting to the top tier and involved in high-level, sophisticated crimes still requires personal connections and a good reputation, especially for being trustworthy. In the words of an expert who has spent a considerable amount of time in the digital underground, “once you are able to establish your- self, it can be lucrative.” Additionally, it can be a badge of honor to survive a purge. Participants in black markets come from all over the world.

Originally, key participants in such markets were former state employees of Eastern European countries who had training and education but were out of work when the Berlin Wall fell (Glenny, 2013). Since then, the sophistication of participants in the black market has soared with the entry of a generation of “digital natives” who have grown up more skilled and can do more things for themselves (i.e., they do not have to hire someone else to reverse-engineer programs or to create an exploit).

In terms of quantity, the leaders in malware attacks are China, Latin America, and East- ern Europe; Russia leads in terms of quality (de Carbonnel, 2013). Different groups operate in distinct spaces. For example, there are Vietnamese groups that mainly focus on eCommerce,

whereas a majority of Russians, Romanians, Lithuanians, Ukrainians, and other Eastern Euro- Figure 2.1 Different Levels of Participants in the Underground Market SOURCES: Drawn from interviews; Schipka, 2007; Panda Security, 2011; Fortinet, 2012; BullGuard, undated. NOTE: Almost any participant can be a ripper; see text for discussion.

RAND RR610-2.1 Proportion of Participants Sophistication/skill levels and various roles Mules (witting) Mules (unwitting) Administrators Vendors General members Subject-matter experts Intermediaries/brokers Unsophisticated/ less skilled Sophisticated/ highly skilled Can be sophisticated or unsophisticated Examples: • Elite researchers • Exploit developers • Zero-day researchers • Malware writers • Identity collectors • Programmers • Tech experts • As-a-service providers • Virtual money mule services • Spammers • Botnet owners • Drop service • Distributors • Hosted systems providers • Cashiers • ID//f_inancial data providers • Buyers • Observers

Characteristics of the Black Market 7 peans mainly focus on attacking financial institutions. Chinese hackers are believed to focus more on IP.5 Recently, some groups have partnered across international lines; one expert com- mented that, “groups that would traditionally never work together are working together.”6 Of late, there has been a migration toward U.S.-based actors becoming more involved; in 2013, almost a fifth of the market was made up of U.S. participants. 7 Many U.S. participants are thought to be involved in financial crime (rather than IP theft).

Business Conduits Markets must have channels to communicate and conduct business transactions. Not sur - prisingly, the channels for cybercrime transactions are virtual ones. Channels initially were largely a combination of bulletin-board-style web forums, email, and instant-messaging platforms that support both private messaging or open chat rooms (e.g., some common types include Internet Relay Chat [IRC] Protocol, ICQ, Jabber, and QQ), and email.

While these channels are still used today, today’s participants also commonly frequent online stores where buyers can chose their desired product, pay with digital currency, and receive the goods without any interaction or negotiation with the seller. This move to mirror legitimate eCommerce storefronts indicates a growing maturity of how business is conducted. It is widely agreed that actors have gotten more sophisticated and innovative in the last four to five years regarding how they interact within these channels—making them more anony - mous, encrypted, and hidden.

For instance, ICQ chats have been replaced by participants hosting their own servers, sharing email accounts where content is exchanged by saving draft messages, and using off-the-record messaging, the encryption scheme GNU Privacy Guard (GPG), private Twitter accounts, and anonymizing networks such as Tor, Invisible Internet Project (I2P), and Freenet. Participants frequently alter their communication tactics hoping to stymie law enforce- ment. More sophisticated participants tend to use cutting-edge tools and technologies more than others. Normally, though, they follow trends.

Tor, for example, is a trend, albeit an older one. 8 Opinions vary on where most transactions take place (it varies with product, participant, or marketplace) as well as where the most valuable interactions take place.9 Some channels are easy to find; others are by invitation and only accessible after a great deal of vetting. In some forums, members can receive more access and privileges through participating in discussions or contributing tutorials (Paget, 2010).

The forums host advertisements, but actual transac - tions generally take place using encrypted and private messaging, locked-down social media 5 Note that many other countries are included in the black market; only a few are mentioned here. 6 For example, one Vietnamese group partnered with Nigerians on a fraud scheme involving stolen eCommerce accounts. In another case, Colombians set up money-laundering “villages” in China. 7 In the 2006–2007 timeframe, the majority of participants were from Russia, with the United States only a small repre - sentation.

In 2013, almost a fifth of the market was U.S.-based, ranked third behind Ukraine and Romania. 8 Here is one case where, in our interview, an expert did not want to describe a newer trend, for fear of tipping the hand of security vendors or law enforcement investigations. 9 Some see forums “like a Craigslist—no one knows anything; it is just a bunch of idiots talking,” where goods that exist in the forums are those that have already been harvested and are just the leftovers. Others say the tools are available in the more restricted, highly vetted forums,

whereas data are more publicly available.

8 Markets for Cybercrime Tools and Stolen Information: Hackers’ Bazaar accounts, or shared email. The evolution of accessing and interacting with the channels has been dictated by available technology. Before the appearance of the iPhone, there was very little proliferation of mobile platforms and devices with which communications and transactions could be completed anywhere, anytime. The progression of communications tools has grown with the proliferation of technology, and it will continue to be this way. Channels and tiers are correlated.

The black market has several tiers of access, with the higher tiers requiring lots of vetting before they can be entered, or even revealed. Conversely, the lowest tier (often the IRC channels) are considered easy to find, as many are publicly avail- able and open to anyone; rippers (i.e., fraudsters) tend to frequent them, for instance. Markets in the next tier up (considered lower-tier forums) are a little harder to find and often require vetting before entry. 10 Some exclusive forums start as smaller groups where people can cut their teeth and work their way up into the bigger ones.

Often, this lower tier exists in such chan - nels as ICQ, Jabber, QQ, et al.11 The tiers that require less vetting tend to have more financial and counterfeit goods available than sophisticated malware or exploit kits, which are found in upper tiers. Because the black market is meant to be hidden, it is difficult to get an estimate for the breakdown of market by tier. One expert puts 10–20 percent of the participants in the highly vetted tiers, and 80–90 percent in the lower, easier-to-find tiers. Of all these players in all of the tiers, an estimate is that only a quarter can be considered highly skilled.

Others maintain that there are too many variables—freelancers versus organized groups, varying types of threat actors, etc.—to make a reasonable breakdown. Figure 2.2 shows a rough estimation of the various communications and transaction channels used by participants, for each access tier. Note that these are relative numbers and only estimates. Language Although English is the universal language of commerce, it is not necessarily the universal lan- guage of this commerce.

Some say very little is done in English; sometimes there are English translations to supplement Russian posts, but the forums are generally in Russian or Ukrai - nian. There are reports of English-only, Mandarin-only, German-only, and Vietnamese-only sites, among others. Nevertheless, phishing, spear-phishing, and other social engineer cam - paigns are typically done in English, as a majority of potential victims know that language. Products The product slate is quite diverse. Products include both goods (hacking tools, digital assets) and services (as-a-service hacking, digital asset handling).

Hacking goods consist of tools that help gain initial access on a target, parts and features to package within a payload, and payloads to have an intended effect on a target. Hacking services consist of enabling services to help scale or deliver a payload, and full-service capabilities that can provide a full-attack lifecycle. There are other goods and services that provide support and ensure the hacking 10 Some differentiate IRC from next-tier channels, but not all. Take, for example, Herley and Florêncio (2009a) and Fossi et al. (2008). 11 For example, Fossi et al. (2008), and Gu (2013).

Characteristics of the Black Market 9 goods and services function properly and are free from obstacles. These include infrastruc - ture and cryptanalytic services, among others. Digital assets are the output from the suc - cessful hacking or hacking services (e.g., financial information, data records, accounts, IP). Digital asset–dealing includes cyberlaundering and facilitating the turning of stolen goods into money. Table 2.1 describes the main categories of products available.

Although as-a-service offerings have been around for a while, they continue to grow in popularity as new products and technologies burgeon. For instance in 2004, as-a-service models were mainly used for adware and spyware when affiliate business models were coming into play. By 2008–2009, DDoS as-a-service became popular. The market demands more spe- cialized, user-friendly, as-a-service models with easy-to-use interfaces, allowing more partici - pants, regardless of technical ability, to enter the market and get involved—they simply pay for installation and have a service do the work.

Goods and service offerings are becoming much more creative (often cited as a result of the increase of tech-savvy digital natives who participate), limited only by the requirement that buyers for such offerings exist. Products have also become quieter and stealthier. Popular spy- ware and adware circa 2004, for instance, generated plenty of revenue, but were noisy, and gar- nered a lot of attention from the security industry. 2009 saw a rise in fake antivirus software, fraudware, and fakeware to steal data and credentials from machines.

Vendors often guarantee their products’ lifespan or value—for example, guaranteeing a particular malware variant is good for ten hours before detection by antivirus products, or that a credit card is good for a certain amount of money—and some can track what a customer does with their product to make sure “terms of use” are not broken—a sort of “digital rights Figure 2.2 Estimate of Various Channels and Tiers Used by Participants RAND RR610-2.2 Relative size of number of total participants per tier Extremely vetted, invite-only (private) Invite-only or semi-private (private) Open (public) Online stores IRC, open chat rooms Private chat and IM Email Forums, boards, bulletin board systems

10 Markets for Cybercrime Tools and Stolen Information: Hackers’ Bazaar Table 2.1 Goods and Services on the Black Market Category Definition Examples Initial a cces s Tools enabl e a user to perform arbitrary operations on a machine, then deliver payloads; can automate the exploitation of client-side vulnerabilities (Zeltser, 2010) • explo it kit (hosted or as-a-service) • Zero-day vulnerabilities (and weaponized exploits) paylo ad parts a nd Features Goods and/or services that create, package, or enhance payloads to gain a foothold into a system • packers • C rypters • Binders • Obfuscation / evasion payl oads Imparts malicious behavior, including destruction, denial, degradation, deception, disruption, or data exfiltration • Botnet for sale enabli ng Services a ssis t a user in finding targets or driving targets to a desired destination to use an initial access tool and/or payload; attack vectors and scaling methods • Search engine optimization services • Spam services • pay-p er-install and affiliates • phishin g and spear-phishing services • Services to drive / find traffic • Fake website design and development Full Services (as-a-service) packa ge together initial access tools, payloads, and payload parts and features to conduct attacks on a customer’s behalf; can provide the full attack lifecycle • Hackers for hire • Botnets for rent • Doxing • DDoS as a service enabli ng and Operations Support product s ensur e that initial access tools and hacking services (enabling or full-service) will work as needed, are set up correctly, and can overcome “speed bumps” or obstacles • Infrastructure (e.g., leasing services, virtual private net- work [V pn] serv ices, bullet- proof hosting, compromised sites and hosts) • Cryptanalytic services (e.g., password cracking, password hash cracking) • C ap TCHa breaki ng Digital a sset s Digital assets are those items obtained from the target or victim (i.e., the hacked or stolen information) • Credit card information (e.g., fullz, dumps, card verification value) • a ccount information (e.g., eCommerce, social media, banking) • email lo gin and passwords • Online payment service accounts • Credentials • pII/p rotected health information (pHI) Dig ital a sset C ommerce and Cyber Laundering Digital asset commerce and cyber laundering, where appropriate, facilitate turning digital assets into cash • Mule Services • Counterfeit goods and ser - vices (e.g., fake documents, identification, currency) • Card cloners, fake aTMs • Cr edit card processor services • Forwarding products services

Characteristics of the Black Market 11 management.”12 For example, a vendor might label and track each install sold, with the ability to shut down anyone who is making too much noise by infecting too many victim machines. Malware for mobile devices has been growing of late, in part because attacking mobile devices brings in money faster than attacking personal computers. SMS (Short Message Ser - vice) Trojans and Fake Installers are the most popular form of mobile malware: They accounted for more than 70 percent of mobile malware as of March 2013, up from 56 percent in 2011 (Juniper, 2013).

Such malware does not require extensive customization. Some see a shift from opportunistic attacks to targeted attacks, and an increase in non - fungible goods (source code, IP, specific target data or credentials, etc.), while others maintain that opportunistic attacks will continue to be strong. Finally, business models and financial innovation have grown more sophisticated.

For instance, buyers can purchase stripped-down versions of a particular software or tool, or get access to goods for free; if they are happy with the product, they can pay more and upgrade to full versions—called “freemium pricing.” Pricing The black market can be more profitable than the illegal drug trade: Links to end-users are more direct, and because worldwide distribution is accomplished electronically, the require- ments are negligible.

This is because a majority of players, goods, and services are online-based and can be accessed, harnessed, or controlled remotely, instantaneously. “Shipping” digital goods may only require an email or download, or a username and password to a locked site. This enables greater profitability. According to experts, black markets operate the same ways traditional markets do. Easily exchanged goods, such as PII or account data, are prey to the normal microeconomic fluc - tuations of supply and demand. Often, there is too much of that product available to sell at normal prices.

By contrast, stolen-to-order, nonfungible goods—such as new technology designs, details on R&D activities, mergers and acquisitions—can command a very high price, provided that the right buyer exists. The yield of a product influences its price. A Twitter account costs more to purchase than a stolen credit card because the former’s account credentials potentially have a greater yield. Immediately after a large breach, freshly acquired credit cards command a higher price— as there is greater possibility for the credit cards to still be active.

But after time, prices fall because the market becomes flooded— e.g., the Target case (Kirk, 2014)— leveling off as the data becomes stale, or if there has been significant time since the last breach. This cycle contin- ues with each new large breach. Access to botnets and DDoS capabilities are cheaper because there are so many more options (same for exploit kits).

The price of PII/PHI is falling (although some believe that its value is rising). 13 Although transactions can be done by means of nondigital currency, sites are moving toward accepting only digital cryptocurrencies, with anonymity and other security character - 12 For instance, different installs of a product can be tracked to ensure a user is not getting more than what they paid for. For example, if a buyer purchases a package to infect 1,000 machines, but figures out a way to infect 10,000 machines, the supplier will cut the user off or demand payment for the extra infections. 13 One example is Clarke (2013a).

12 Markets for Cybercrime Tools and Stolen Information: Hackers’ Bazaar istics. Various versions of digital currency and digital currency platforms have been around since the early 2000s. Popular ones have been Liberty Reserve (until taken down in May 2013), WebMoney, and Bitcoin. Others include Pecunix, AlertPay, PPcoin, Litecoin, Feathercoin, and Bitcoin extensions, such as Zerocoin. There is no consensus on which form of digital currency, if any, might be a clear leader; many digital currencies are interchangeable.

Whichever cur - rency prevails is likely to be chosen for its anonymity, security, and nontraceability. Exchanges surrounding these cryptocurrencies are increasing in popularity, as are attacks on them. Experts predict that we will soon see more cryptocurrency targeting, DDoS services against cryptocurrencies, and more malware with the sole purpose of targeting wallets and bitcoins. It is difficult to assess trends for different products; product/price relationships can be quite nuanced and depend on a variety of factors (e.g., brand name, quality of services, rent - ing vs. buying).

Although prices range widely—for example, hacking into accounts can cost anywhere from $16 to more than $325, depending on the account type (Goncharov, 2012)— similar products tend to go for similar amounts. Exploit kit prices vary based on whether they are purchased outright or rented for intervals of varied length, 14 what exploits are included, and the quality of services and products offered rather than the quantity of exploits bundled together. Brand-name recognition also plays a role.

Services can involve leasing servers, finding traffic, creating a personalized payload (or “cleaning”/obfuscating an already existing payload to avoid antivirus signatures) and setting up infrastructure. See Table 2.2 for (nonexhaustive) examples of prices for exploit kits from 2006–2013, and Table 2.3 and Figure 2.3 for avail - ability of exploit kits. Note these are just a handful of exploit kits that have been available. 15 Table 2.3 and Figure 2.3 show the number of new exploit kits through 2013.

A more concerted effort for trade activity and competition accounts for the 2009 jump. 2012 saw more “interesting” vulnerabilities found and reported—causing an increase in competitors and exploit kits, especially those from Asia (Paget, 2010a). The cost for data records or credit cards also varies.

Account records are more valuable— and hence, more expensive—if more value can be charged against such accounts, 16 they are “newer” to the market (i.e., the account has not yet been closed down by the bank or eCom- merce site), or they are rare.17 After a large breach—for example, the 2005–2006 TJ Maxx/TJX hack, the 2007–2008 Heartland Payment Systems breach, or the recent 2013 Target breach (InformationisBeautiful, undated)—the market may be flooded with data, causing prices to go down; one expert cited a price drop from $15–20/record to $0.75/record over a relatively short period.

Prices for credit card data may start at $20–$45/record if supply is limited or the 14 E.g., renting for a year versus renting for three months. 15 While they are too numerous to name here, a few notable exploit kits have included: El Fiesta, ICEPack, MPack, GPack, WebAttacker, Fragus, YesExploit, Siberia, Neosploit, MyPolySploit, XCore, UniquePack, LuckySploit, SPack, Lib - erty, Fiesta, Eleonore, MyLoader, SEO Toolkit, JustExploit Elite Loader, Clean Pack, Shamans Dream, Max Toolkit, CrimePack, FSPack, Sploit25, MultiExploits, Tornado, Limbo, Lucky, Neon, Nuke, Spack, Sploit, Unique, ZoPack, Styx, Neutrino, Magnitude, Sakura, LightsOut, RedKit, Kore, GongDa, et al.

More information on several of these exploit kits is available in Parkour (2014). 16 For example, a credit card with a lower limit, or a low balance in an eCommerce account (e.g., PayPal) is cheaper than the higher-limit signature, gold, or platinum card. 17 There is not always a steady supply of all types of credit cards. It can depend on where point-of-sale and endpoint termi - nals (like cash registers) are found to be vulnerable. For example, it may be possible to break into a terminal in Pennsylvania during a time when nothing vulnerable can be found in Germany.

Characteristics of the Black Market 13 Table 2.2 Exploit Kit Prices Over Time Exploit Kit Price Year Mpack $1,000 2006 w eba ttac ker (Do-it-yourself kit) $15–20 2006 Icepack $3 0–400 2007 Mpack $700 2007 eleonor e (v1.2) $700 plus $50 for encrypter 2009 eleonor e (v1.2) $1,500 fully managed by user 2009 phoen ix $400 2009 Blackhole (v1.0.0) $700/three months or $1500/year 2010 Crimepack $ 400/license 2010 eleonor e (v1.3.2) $1,200 2010 eleon ore (v1.6 and v1.6.2) $2,000 2010 Fragus $800 2010 LuckySploit $1,000 2010 Yes explo it (abuse-immunity) $1,150 2010 Yes explo it (Standard editi on) $900 2010 phoen ix (v2.3) $2,200 2010 nuclea r $900 2010 Katrin $25/day 2011 r obopak $ 150/week or $500/month 2011 Blackhole (v1.1.0) $1,500 2011 Blackhole (v1.2.1) $700/three months or $1,500/year 2011 Bleeding Life (v3.0) $1,000 2011 phoen ix (v3.0) $2,200/single domain 2011 phoen ix (v3.0) $2,700/multi-threaded domain 2011 eleono re (v1.6.3a) $2,000 2011 eleono re (v1.6.4) $2,000 2011 eleono re (v1.6.2) $2,500-$3,000 2012 phoen ix (v2.3.12) $2,200 / domain 2012 Styx sploit pack rental $3,000 / month 2012 explo it kits that employ botnets up to $10,000 2012 CritXpack $ 400/week 2012 phoen ix (v3.1.15) $1,000-$1,500 2012 nucSoft $1 ,500 2012 Blackhole—hosting (+ crypter + payload + sourcecode) $200/week or $500/month 2013 w hiteho le $200–$1,800 rent 2013 Blackhole—license $700/three months or $1,500/year 2013 Cool (+ crypter + payload) $10,000/month 2013 Gpack $1,000–$2,000 2013 Mmpack $1,000–$2,000 2013 Icepack $1,000–$2,000 2013 eleonor e $1,000–$2,000 2013 Sweet Orange $450/week or $1,800/month 2013 w hiteho le $200–600/week or $600–1,800/month, depending on traffic 2013 SOUr CeS: Cl arke, 2013a; Fossi et al., 2011; Fortinet, 2012; Goncharov, 2012; Kafeine, 2013a; Krebs, 2013a; M86 Security Labs, 2010; Martinez, 2007; Mc a fee La bs, 2011; O’Harrow, 2012; paget , 2010b, 2012; parko ur, 2014.

14 Markets for Cybercrime Tools and Stolen Information: Hackers’ Bazaar cards are freshly acquired, or $10–$12 if there is an influx. Credit cards acquired in the Target breach initially fetched anywhere from $20–$135, depending on the type of card, expiration, and limit (Krebs, 2013h).

Experts note that high or no-limit cards (e.g., the American Express Black card), or cards with chip and personal identification number (PIN) are more valuable, and can command a higher price, and when the data begin to get stale, it may be “on clear - Figure 2.3 Proliferation and Variety of Exploit Kits Over Time (non-cumulative) SOURCE: Data drawn from Paget, 2010b, 2012; Parkour, 2014; as well as interviews with Paget and Parkour.

RAND RR610-2.3 30 25 20 15 10 5 35 0 Number of new exploit kits ≤ 2005 2006 2007 2008 2009 2010 2011 2012 2013 Table 2.3 Proliferation and Variety of Exploit Kits Over Time (non-cumulative) Year Number of New Exploit Kits New Versions of Exploit Kits ≤ 2005 — — 2006 1 1 2007 2 2 2008 1 1 2009 11 13 2010 13 20 2011 16 24 2012 28 38 2013 33 42 SOUr Ce: Da ta drawn from paget , 2010b, 2012; parko ur, 2014; as well as interviews with paget a nd parko ur.

Characteristics of the Black Market 15 ance” for something like $2–$7/record (see Table 2.4). eCommerce accounts (e.g., PayPal or Amazon) can be sold for a fixed price, or based on the percentage of the remaining balance.

Stolen credit card data from Europe and the United Kingdom are more valuable than data from U.S. cards for several reasons:18 • There is typically a delay when a card is processed in a foreign bank, so more can be charged before the bank figures it out. • European cards often have higher credit limits. • Many European cards (with their chip and PIN with signature system) are normally thought to be more secure that their U.S. counterparts (signature only) and are corre- spondingly more valuable if they can be broken and put on the black market.

IP is harder to put a value on because it can be so unique, and generally requires a specific buyer. IP can be inadvertently acquired as a byproduct of an intended goal, or can be specifi - cally sought. There are those in the market who sell services to go after IP for a specific buyer, and those who advertise IP as a secondary gain, and who may struggle to find the appropriate buyer. Reliability and Integrity The black market continues to put great stock in reputation, at least within the harder-to-access tiers.

Thanks to an increase in takedowns (of sites, groups, tools, or individuals), participants have labored to loosen the correlation between virtual identities and real identities. Thus, mar- kets have seen more anonymous currencies and encrypted and stealthy communications. More of the market is hosted on darknets and through VPN services. While this trend does not affect reliability of products (some say it will make it stronger because only the highly vetted make it in), it reduces the accessibility and availability of the market. It also leads to much more intense personal vetting.

The validation of person, product, and payment can all be tricky in underground mar - kets. Buyers and sellers validate each other through reputation, personal relationships, middle- men, or intermediaries (e.g., forum administrators). Sellers may provide demo versions or a sample of their goods. While it is a black market and thus harder to validate payment, it is also 18 They are followed by countries like Australia, Singapore, and Middle Eastern countries; experts note that most Eastern European or African cards are not considered to be of much value.

Table 2.4 Credit Card Prices Based on Market Circumstance Credit Card Price Market Circumstance $20–$45 Freshly acquired $10–$12 Flooded $2–$7 Clearance (“stale” data) SOUr Ce: Da ta drawn from interviews; Krebs, 2013g

16 Markets for Cybercrime Tools and Stolen Information: Hackers’ Bazaar a relatively small community—at least in the highly vetted, more elite tiers—where bad apples (e.g., rippers) are more quickly detected.19 Vetting entails either having credentials and getting vouched for by members in good standing, or proving oneself (e.g., by getting good reviews on a product presented for examina- tion). Being vetted into the most elite tiers offers great rewards. Those accepted have access to everything they might need. Much of this vetting is based on preexisting cultures, communi - ties, and connections.

But the vetting process moves at a deliberate pace; people are particularly wary of those who promise products or services that sound too good to be true. Some members know each other on a personal level, having interacted in gaming forums or even in person; they often speak the same language (see, e.g., Qing, 2011). Some experts say such markets exist in private (e.g., ICQ-type) chat channels; others maintain they exist only in forums; still others say they exist in both, with advertising done in forums but actual transactions conducted via instant messaging.

And channels may be open for less than a day to conduct business before administrators tear them down. Vetting was rare in the early days; it was easy enough for an actor to just want to get involved, and be included. Today, vetting is more robust, 20 and the cost to entry is higher, as takedowns increase and as law enforcement and security companies get more successful at infiltrating the black market. This trend is typical of any move-countermove relationship between offense and defense.

More aggressive vetting, especially for access to the high-quality sites and tiers, will mean less accessibility for newcomers, who may be viewed as suspicious. Transactions in the darknet will likely increase, which means it will be harder to get involved if one is not already, and harder for law enforcement to find these marketplaces. Product and brand reliability also remain important. 21 As a general rule, products and services sold in black markets reliably do what they purport to do.

The problem of product integrity comes when those reliable goods have additional unwanted “features” (e.g., a backdoor for exploit kit creators to access later). These types of features tend to show up in the lower-tier markets. Thus, performing due diligence on a product, vendor, or service is important; this may require buyers to find a due diligence service or to be tech-savvy enough to investigate matters themselves.

Because contracts in black markets cannot be legally enforced, they are constantly plagued by rippers, who do not provide the goods or services they advertise, and are an exception to product reliability. Rippers tend to get reported and then often quickly removed.

Although 19 There is some disagreement on how rampant scams are—but it mostly has to do with which markets and tiers are being discussed: • Herley and Florêncio (2009b) focus on the lowest market tiers (IRC channels) and states that there are lots of rippers in this market, making it a lemon market. (See also Fisher, 2009.) • One expert we interviewed stated that the markets that anyone can easily find (e.g. IRC / lowest tier) are rife with a high percentage of rippers. Of the other markets, the lower tier is approximately 30 percent rippers,

whereas buyers in the higher tier rarely get ripped off. • Another expert we interviewed stated that there are very few bad people; while the networks can comprise several thousand people, they stay relatively small and tightknit because most business is reputation-based. • A general consensus among many of the other experts interviewed stated that, “if you can be scammed, you will be scammed,” wherever you might be. 20 One expert noted that different markets for various goods (e.g. financial data, IP, exploit kits) have their own ways of vetting. 21 Some say these elements are similar to the noncriminal world, in that there will always be some who care about branding and some who do not.

Characteristics of the Black Market 17 they can easily access new channels under new names, it takes time to re-establish a reputation, which inhibits cheating. One estimate suggests that about 30 percent of the sellers (at least of financial data) are rippers, and the success rate of getting money back after being ripped off is only 15–20 percent. Unsophisticated or newer buyers are most often the ones cheated. For the most part, this happens in the lower, easier-to-access, less-vetted tier, as well as the parts of the black market that deal with credit cards and financial data, where rippers are prevalent.

Sensitivity to External Events Different pieces of the market react differently to outside events (e.g., natural disasters, revela- tions to Wikileaks, or releases of new operating systems). Front-page news items are often used in spear-phishing campaigns (e.g., “click this link to donate to victims of Haiti earthquake”) raising the number of potential victims. Conversely, unrest in a certain part of the world can take people there out of the market (e.g., some vendors of credit card data from Egypt were less active during unrest). This can raise the price of products as the supply decreases.

Although newer operating systems and browsers tend to be more secure against attacks, their introduction does not affect black markets immediately because developers (and their kits, programs, and products) tend to focus on the plentitude of older systems with unpatched software. When the newer systems are targeted, malware developers make sure their tools are up to date with the latest releases (e.g., can get past the latest antivirus) and can affect as many users as possible.

Resilience The black market acts much like a traditional market; profit drives people to innovate and keep pace with rapidly changing technology. As more targets (users, companies, etc.) increase their digital connections and points of presence, the market keeps pace. Whatever is new or novel for the traditional consumer—from mobile devices to cloud solutions and new social media platforms—offers new entries for attack and will thus have a counterpart exploit on the black market.

Another facet of resilience has been the black markets’ ability to survive the recent increase in takedowns, which have little effect on the size or composition of the black market. As one entity goes down, another takes its place, often within days. Although suspicion and “paranoia” spike among participants, and some countermeasures are enacted (such as stron - ger encryption, more vetting, increased stealth, etc.), the market just hiccups and returns to normal, albeit a somewhat less accessible and less open version of normal. Several factors explain the recent increase in takedowns: 1.

Law en forcement has gotten better over the last ten to 15 years. Those now coming into law enforcement have grown up comfortable with technology and computers. Training in the digital world has gotten better for law enforcers all over the world, making them stronger as an entity. Overseas partnerships and cross-pollination of ideas have also improved law enforcement—although perhaps more so at the federal

18 Markets for Cybercrime Tools and Stolen Information: Hackers’ Bazaar level. Leadership in law enforcement, intelligence, and the Department of Defense has accorded cyber top priority and moved resources accordingly. 2. Susp ects are going after bigger targets (and thus are attracting more attention). Since roughly 2002, attacks have shifted from opportunistic one-offs (going after who- ever may be unsecure) to attacking companies. Companies, now that they understand they are targets, are more willing to work with law enforcement, and the public-private partnership has gotten better. 3.

Crim es involving digital goods are proliferating. In 1998, few crimes involved the digital realm (in the single digits). Starting at the turn of the century (2000–2001), more crimes were digital (about half). Now, almost everything involves a digital aspect. Because so much more crime has a digital element, law enforcement has more opportu- nities to encounter crime in cyberspace and learn from such encounters. But law enforcement may become a victim of its own success. More arrests and take- downs lead to more media coverage, and hackers become more aware of the opportunities pro- vided by black markets.

Further, those already in the market grow smarter as they learn from law enforcement’s investigative techniques. Additionally, the consequences of takedowns are transitory.

Consider the following: Liberty r eser ve • Takedown: May 201322 • Other Currencies Used: Immediately • Immediately thereafter, several other types of digital currencies were up and running, 23 but so far without a clear winner.24 Blackhole e xplo it Kit (and Cool e xplo it Kit) • Author / Administrator Arrested: October 2013 • Other Exploit Kits Up and Running: Almost immediately.25 • The Blackhole Exploit Kit was the most popular as-a-service exploit kit from the time it launched in late 2010 to the arrest of its author (developer and maintainer).

In 2012, more than half of the web threats were cited as from Blackhole (Howard, undated). While no clear winner has emerged from Blackhole’s takedown, there are plenty of viable candi- dates.

Silk r oad • Ta kedown: October 2013 (the alleged chief operator, Ross Ulbricht, was arrested)26 22 See Krebs (2013b) on the takedown. 23 See Krebs (2013c) on different types of digital currencies. 24 Krebs compares it to the number of peer-to-peer systems that popped up after the takedown of Napster in the 1990s. 25 There was a quick move from Cool Exploit Kit (a more exclusive version of Blackhole Exploit Kit) to Whitehole Exploit Kit (Segura, 2013); Arrest of alleged Blackhole Exploit Kit author, Paunch, led to reduction of spam campaigns using Blackhole Exploit Kits—but other spam took its place (Manly, 2013); Magnitude Exploit Kit replaced Blackhole (Kovacs, 2013b); Neutrino, Kore, and Nuclear Pack also remain popular exploit kits (Kafeine, 2013b) 26 The operator assumed the moniker “The Dread Pirate Roberts.”

Characteristics of the Black Market 19 • Version 2.0 Back Up: November 2013 (under a different Dread Pirate Roberts)27 • The Silk Road, a marketplace mostly known for illicit drugs, also dealt in items such as stolen credit cards and other records. Silk Road 2.0 is still finding its footing. Carder.su • Takedown: March 201228 • Other Forums in Its Place: Almost immediately • Carder.su trafficked in credit card and other stolen financial information. Other markets such as carderplanet, carder.pro, badb.su, etc. existed before, during, and after carder.su (Krebs, 2012; Krebs, 2013d).

Vietnamese ring dealing with identity theft and stolen eCommerce accounts • Takedown: 2012 (Leyden, 2013b) • After the arrest of 14 masterminds of an elaborate ring involved in selling identities and eCommerce accounts (e.g., PayPal, Amazon, etc.), other (lower) members of the group stepped up to continue operations (Krebs, 2013g). One reason takedowns only temporarily affect the black markets is that even if a tool, forum, group, or individual gets taken down, the vast majority of what is used does not get taken down, too.

For example, exploit kits are not generally proprietary, and other groups can use them or build their own based on leaked or released source code. In fact, takedowns may be beneficial for the market as the removal of a popular product allows others to vie for its now available market share. The decline of Blackhole Exploit Kit is one example of this. Perhaps another reason that takedowns have not seriously dented the market is that many countries condone hacker activity that is illegal in the United States.

One Russian hacker was arrested, let out on a technicality, apologized to, and is now connected to the government. Although Russian officials may have a good idea of what is happening, as long as they can point to fraud in other parts of the world—especially in the West—they tend to let things slide (de Carbonnel, 2013). China also tends to turn a blind eye, although there are reports of cracking down on some fraudsters. But not all countries are like that.

To give a few examples, Vietnam is very helpful, and other Eastern European countries (e.g., Romania, Ukraine, Poland) can be selectively helpful (perhaps, on Ukraine’s part, to retain its option to rejoin the European Union). 27 See timeline in Antilop (2014). 28 See Ritter (2012); Warner (2009); Warner (2012); and United States of America vs [redacted], (2012).

21 Figure 3.1 Botnet Timeline RAND RR610-3.1 Botnets gain ground and are commanded via IRC channels Botnets primarily used for spamming Number of botnet variants double (from use in early 2000s) due to source code and graphical user interfaces available Spam is most common use for botnets 190,000 DDoS attacks; DDoS second most common use for botnets 80 percent of spam sent by botnets 80 percent decrease in spam levels due to increased takedowns, better anti-spam protection, and shift to DDoS Botnets use P2P protocols, making them harder to take down Nov 2005: DDoS attack on godaddy.com lasts one hour Jan 2009: DDoS attack on godaddy.com lasts 24 hours: increase enabled by larger and more sophisticated botnets 2010 2006 2014 2002 DDoS-for-hire services decline (est) Botnets used for DDoS attacks against digital currencies (e.g., Bitcoin) DDoS-for-hire services begin Renewed interest in DDoS-for-hire services General Spam DDoS Example attack

CHapTer T Hree The Black Market and Botnets From the mid-2000s through today, botnets have been one of the largest enablers of cyber - crime. Not surprisingly, their presence and offerings are significant on the black market. In this chapter, we provide a focused look at botnets and their role in the black market. Figure 3.1 provides an overview timeline. Botnets started gaining ground in the market in 2003–2004, when they were used mainly for spamming. Botnets originally operated on IRC and could be taken down by shut - ting down the IRC server.

Nevertheless, the number of botnet variants doubled between 2004 and 2005, when the source code and a graphical user interface for creating botnets became available on the black market. This availability enabled lower-skilled users to create botnets by simply pointing and clicking (McAfee Labs, 2009). By 2007, more botnets using peer-to-peer (P2P) protocols appeared, making them harder to take down because of their distributed con- trol (McAfee Labs, 2009; Grizzard et al., 2007). Although the most common use for botnets was still spam in 2008 (Kamluk, 2008), and 80 percent of spam was sent by botnets by 2009

22 Markets for Cybercrime Tools and Stolen Information: Hackers’ Bazaar (Namestnikov, 2009), spamming peaked in 2010 (White, 2011; Kovacs, 2013a). Spam levels sharply decreased (80 percent decrease between July 2010 and July 2011) because of a combina- tion of takedowns, better antispam protection (e.g., by email service providers), and the shift- ing interest of botnet operators from spamming to DDoS attacks (Kovacs, 2013a; Symantec, 2011; Gudkova, 2013; Leyden, 2011). DDoS attacks are another major role for botnets.

In 2008, experts recorded about 190,000 DDoS attacks, and it was reported that DDoS attacks were the second most common use of botnets (behind spamming). 1 The pace of DDoS attacks has fluctuated over the past decade. DDoS-for-hire services began around 2004, but began to drop off around 2008–2009, as defenses improved. As DDoS techniques became more sophisticated, DDoS services picked up again around 2011 (just as spam levels began to decrease) and remain popular today (Leyden, 2011).

Experts anticipate an emergence of DDoS attacks used against cryptocurrencies (e.g., Bitcoin), which may show up as early as 2014. 2 Botnets have grown substantially, and that growth has greatly enabled DDoS attacks. For example, a November 2005 DDoS attack against godaddy.com lasted only one hour; just over three years later godaddy.com sustained a DDoS attack that rendered its sites unavailable for 24 hours. This second attack could not have persisted for so long without the availability of significantly larger botnets (Namestnikov, 2009).

Larger botnets have also made password cracking faster and easier, allowing cybercriminals to perform tasks in hours that would have taken them years (Fortinet, 2012). Botnets have other uses: e.g., phishing; click-fraud; harvesting credit card numbers, secu- rity credentials, and PII; providing anonymous Internet access to cybercriminals (Kamluk, 2008; Namestnikov, 2009).

In the last few years, criminals have started using botnet hosts as proxies when they purchase items with fraudulent credit cards; by purchasing with an IP address from the same area as the stolen credit card, buyers evade transactional profiling by credit card companies. Mining digital currencies has become another popular role for botnets. The ZeroAccess botnet, currently one of the largest known, deals exclusively in bitcoin mining and click fraud (Symantec, 2013). Experts note that botnets can also be used to power orches- trated attacks by state-sponsored organizations.

Sophistication Botnets have grown larger and more sophisticated over time. Early implementations were com- prised of perhaps a dozen machines. Today’s botnets employ millions (Namestnikov, 2009). This growth is enabled by the decentralized ability to control botnets through websites (e.g., using Hypertext Transfer Protocol rather than IRC or P2P) that exploit kits can interface with (McAfee Labs, 2009). Botnet service models have also grown more sophisticated.

Some higher-order service models sell limited-time access to botnets, or allow customers to create their own botnets based on certain targets (e.g., Bank of America accounts worth at least $10,000). Another trend many cite is the employment of dedicated purpose-built servers rented to users by seemingly legiti - 1 For number of attacks, see Namestnikov, 2009; for second-most common use of botnets, see Kamluk (2008). 2 For example, see Leyden (2013a).

The Black Market and Botnets 23 mate “web-hosting” companies. These are much more powerful than traditional multipurpose botnet servers, because the provider can ensure that each machine is exclusively available for use by the botmaster, and not used for any other purpose. Cost Trends Over Time Botnet rental prices vary greatly across the large range of products available. For example, the price for a 24-hour DDoS attack in 2009 ranged from $50 to thousands of dollars, based on the size of the botnet needed to perform the attack (Namestnikov, 2009).

Although many reports of botnet rentals fail to specify parameters (e.g., size of the botnet, length of attack time) and botnet characteristics vary widely, experts say that base access to botnets (especially for DDoS attacks), has gotten less expensive over time (Fortinet, 2012; Goncharov, 2012; O’Harrow, 2012; Jianwei, 2012). While a more sophisticated botnet may still carry a high price tag, botnets are cheaper in general because there is a wealth of selection available on the market.

CHapTer F OUr Zero-Day Vulnerabilities in the Black and Gray Markets Zero-day vulnerabilities (“zero-day exploits”, or just “zero-days”) are exploitable vulnerabilities that a software vendor is not aware of and for which no patch has been created. Zero-days are thus desirable for hackers, because everyone is vulnerable to exploitation. This, combined with zero-days being difficult to find and difficult to develop an exploit for, makes them pricy. Zero-days are most often thought to be used for corporate espionage, or highly targeted attacks where the only entry is through a zero-day.

Zero-days are not as prevalent as some might advertise, but they are bought and sold on the black market, if one knows where to find them. What is more prevalent on the black market are “half-days” (or, as one expert calls them, “1-days” or “2-days”), where the software creator may know of the vulnerability and a patch may be available, but few users are aware and implementing those patches. For most attacks, a zero-day is not needed unless penetrat - ing the target requires it. Generally, consumer-grade malware and tactics will get into almost any network, or “half-days” will suffice.

That said, it is generally thought that if one can afford them, it is always good to have a few zero-days in one’s back pocket. Researchers have talked about the possibility of a legitimate vulnerability market (i.e., a “gray” market) for zero-days for many years. 1 Such markets now exist, but are not as well advertised or immediately accessible.

Others advocate for governments and security vendors to buy zero-days actively to keep them off the black market (Gonsalves, 2013; Frei, 2013). 2 Participants and Structure It is difficult for buyers and sellers to find each other easily, as suspicion and the need to vet are high. Experts note that governments are increasingly showing up as buyers.

Forums on this topic — e.g., bitcointalk (2013)—note several reasons why it is better to sell zero-days to security firms (or possibly governments) than on the black market—including the decreased risk of get- ting ripped off,3 and the possibility of future job offers. 1 Dancho Danchev (2005; 2006) proposed an eBay-like market, 0bay, back in 2005; Charlie Miller (2007) described the market. WabiSabiLabi started in 2007, with the desire to become the eBay for zero-days (Anderson, 2007; WabiSabiLabi, 2007). 2 Additionally, there are reports that governments and security vendors are already participating this way.

Advocates argue for more participation and more openness with the process. 3 See, for example, Kumar (2013) and Pastebin.com (2013).

26 Markets for Cybercrime Tools and Stolen Information: Hackers’ Bazaar There is a sense of distrust about being anonymously contacted about anything related to zero-days, whether it be for purposes of information or for other means. Unsolicited approaches are not welcome; e.g., PlugBot (2013).

Because zero-days tend to be specialized for the customer, validation and verification are a must—and reputation matters a great deal, as with the other parts of the black market. 4 The fact that zero-days can be well documented helps intermediaries validate them, and vali - dation allows people to pay serious money for them. As with the crimeware hacker market, there are third parties that broker the sale of zero-days between researchers and companies (or governments).

Some third parties are themselves companies (Greenberg, 2012a, 2012b; Loidl, 2011)—e.g., VUPEN, 5 Endgame (Gray, 2011), Netragard (undated), ReVuln—but not all; e.g., bitcointalk (2013). Prices Little data are available on price ranges for zero-days; more is available about those on the gray market than those on the black market. However, prices vary widely depending on several factors.

Zero-day prices range from a few thousand dollars to $200,000–$300,000, depend - ing on the severity of the vulnerability, complexity of the exploit, how long the vulnerability remains undisclosed, the vendor product involved, and the buyer. Some estimates even go up to $1 million, but are often thought to be exaggerated. Zero-days’ “single-use” nature also con- tributes to the high price (Fidler, 2014). Prices for zero-days on the black market can also fluc- tuate based on buyer location—that is, a buyer in Cambodia may pay less than a buyer in the United States.

Prices on both the black and gray markets run much higher than the bounties that companies pay to have bugs in their own systems disclosed. Some sources say a researcher could earn 10–100 times what a software vendor with a bug bounty would pay; for example, HP’s Zero Day Initiative and Verisign’s iDefense Vulnerability Contributor Program only pay up to $10,000 for exploits (Critical Start, 2012; Bilge and Dumitras, 2012).

As a result, some of those who offer bug bounties, such as Google, have started to increase their rewards. 6 The rise of bug bounties and increased media attention suggest a push for more responsible disclo- sure, along with appropriate compensation, in the white and gray realms (bugsheet, undated; NibbleSecurity, undated; bugcrowd, undated; Schneier, 2007). Table 4.1 shows a price list for zero-days. As can be seen, data are sparse and inconsistent. While not stated specifically, it is inferred that these are gray market prices, rather than black market ones.

Some experts say the price for zero-days is decreasing significantly, and others say they are getting more expensive (along with advanced delivery mechanisms). A price drop may indicate higher volume (i.e., higher supply), or less demand (i.e., less wanted, something else has become more valuable).

It appears to be more the latter; that is, the “half-days” suffice. 4 For example, it would tarnish a reputation if a zero-day was purchased and then found to be patched already, or already sold to someone else. 5 VUPEN claims it differs from other brokers in that it does not buy third-party products, and does all its research in-house (Schwartz, 2013). 6 Google’s bounty program usually pays $3,000 to $5,000, with some non-Chrome exploits fetching up to $20,000 and up to $150,000 for Chrome exploits (Fisher, 2013b).

Zero-Day Vulnerabilities in the Black and Gray Markets 27 Trends for the Zero-Day Market The market for zero-days (black or gray) is gaining in popularity, or at least in recognition, which may mean a potential increase in malware and attacks—one study shows that after zero-days are disclosed, the number of malware variants exploiting them increases 183–85,000 times, and the number of attacks increases 2–100,000 times (Bilge and Dumitras, 2012)— as well as security vendor and bug bounty participation.

This trend could better regulate the prices, but could be negative in other aspects (i.e., drain the funds of security vendors, cause more nefarious actors to buy the more reasonably priced zero-days). Currently, there are too little data to suggest the trend in prices. It is debatable whether there is more openness about buying and selling zero-days.

There certainly is more chatter about zero-days: There are more news reports and articles; 7 companies that deal with zero-days are rising; and bug bounty programs are burgeoning. 8 But one result of this increased attention is that brokers and those who interact in this market have closed ranks and become more reticent in talking about zero-day markets. Perhaps the overall level of suspicion and due diligence have gone up. Or, perhaps, people fear losing their livelihood if 7 For example, reporters Brian Krebs, Andy Greenberg, and Joseph Menn write on the topic quite a bit.

Other examples include the February 2011 leaked email from HB Gary revealing that Endgame sold zero-day vulnerabilities (Gray, 2011), and Egelman et al. (2013) on the ethics and implications of the market for zero-day exploits. 8 Bug bounties are gaining popularity: Examples include No More Free Bugs, Packet Storm, and BugCrowd, as well as vendor-specific programs like Mozilla’s Bug Bounty Program. But these do not pay out the same as on the black market. So, while there is plenty more coverage and press on these avenues, a researcher can get a lot more money through other means.

Table 4.1 Zero-Day Prices Over Time Service Price Year “Some exploits” $200,000–$250,000 2007 “w eapon ized exploit” $20,000–$30,000 2007 a “re al good” exploit $100,000 2007 Microsoft excel > $1 ,200 2007 Mozilla $500 2007 Vista exploit $50,000 2007 w MF ex ploit $4,000 2007 ZDI, iDefense purch ases $2,000–$10,000 2007 a dobe r eader $ 5,000–$30,000 2012 a ndroi d $30,000–$60,000 2012 Chrome or Internet explo rer $80,000–$200,000 2012 Firefox or Safari $60,000–$150,000 2012 Flash or Java Browser plug- ins $40,000–$100,000 2012 iOS $100,000–$250,000 2012 Mac OSX $20,000–$50,000 2012 Microsoft w ord $5 0,000–$100,000 2012 w indows $ 60,000–$120,000 2012 SOUr CeS: Gr eenberg, 2012b; Miller, 2007.

28 Markets for Cybercrime Tools and Stolen Information: Hackers’ Bazaar they talk about what they do. One expert said the decline in openness was due to several recent reports and leaks, and a broker’s clients asked him to stop talking about his work. As awareness of zero-days has increased, access to them has not. One still needs to be sophisticated and certainly needs to know the right person (an argument for why more bro - kerage companies and individuals pop up to help with this) but even those “right people” stay quiet.

CHapTer F IVe Are Hacker Black Markets Mature?

Market maturity can be understood in several ways: • sophistication: The market changes and adapts to the current needs. • reliability and integrity: People and products are what they say they are, and do what they say they do. • accessibility: There is a low cost of entry, and it is relatively easy to get involved, espe- cially in the lower-access tiers—and, once vetted, in the higher-access tiers. • specialization: There are distinct and customized products, places, and participant roles and division of labor. • resilience: External events do not affect the market—or, if they do, the market bounces back.

Table 5.1 is our assessment of the maturity of the market. Evidence suggests that the black market is highly sophisticated and specialized, and has high continuity (resilience) as well as reliability. On the minus side, integrity is imperfect, accessibility is not predictable, and inter- ruptions by law enforcement are increasing in the wake of numerous takedowns. The various colors depict the general trend for each of the characteristics of maturity. Green represents a positive trend, yellow a mixed trend, and red a negative trend.

In aggregate, trends indicate a growing and robust market, measured by the number of participants, volume of transactions, and amount and size of reported hacks.

30 Markets for Cybercrime Tools and Stolen Information: Hackers’ Bazaar Table 5.1 Characteristics of Maturity Characteristic Signs for (e.g.) Signs Against (e.g.) Overall Trend Sophistication Seeing more of the “hacker concierge” concept; constant innovation in tactics and products due to move- countermove Constant innovation to match the latest technology Getting increasingly sophisticated; movement from ad hoc networks and groups to highly “regulated” organizations r eliab ility and integrity peopl e guarantee a balance on a card Used to not know whether a card would work. now, ve ndors guarantee the card for X amount of dollars Guarantee length of time a Trojan or malware will last before detection r ippe rs can exist in all tiers.

If a participant can get ripped off, they will, at any level— although the more sophisticated players and the higher-access tier participants tend to get ripped off less extra “f eatures” are common in products r eliab ility is high, but integrity is low Has always been pretty reliable, integrity will continue to be tested a cces sibility “Geometric growth” of malware, exploit kits, etc., and consumer-based attacks The best “shops” can be hard to find—need to be in the know; more suspicion of others, more vetting, more focus on anonymity Once in, can operate freely, but getting in, especially to the high tiers, is difficult Much more accessible and available due to proliferation of technology, but also increased vetting, movement to darknet, and use of anonymity and encryption tools Specialization Customized malware, as-a-service models unique to each customer Increase in specialized roles and abilities, more customized products Has always been pretty specialized, will continue to be this way r esilie ncy Takedowns or arrests only minimally, and temporarily, affect continuity of operations a n incr ease in takedowns Despite increase in takedowns, the market bounces back (may take a little time) The market remains continuous, even with the increase of takedowns nOTe: G reen represents a positive trend, yellow a mixed trend, and red a negative trend.

CHapTer S IX Projections and Predictions for the Black Market Maturity did not come automatically or easily to the black market. It took more than a decade of continuous development and innovation, the introduction of new generations of digitally savvy participants, and significant trial and error to achieve today’s maturity. Figure 6.1 is a brief synopsis of the circumstances, events, status indicators, and trends of the black market. See Appendix A for more detail. While our experts agreed on many trends for the future, they differed on others. We first cover those that garnered consensus.

Most-Agreed-Upon Projections and Predictions • There will be more activity in darknets, more checking and vetting of participants, more use of cryptocurrencies, greater anonymity capabilities in malware, 1 and more attention to encryption and protecting communications and transactions. T witter is becoming a channel of choice; Tor and VPN services are finding increased use.

Addition- ally, in the wake of Edward Snowden’s actions with the National Security Agency, more of society is concerned with privacy and implementing encryption and protection measures, which will lead to an increase in the number of efforts to break those communications. As more data are encrypted in transit, the value of subverting machines to get to data will rise. • The ability to attack will likely outpace the ability to defend.

Attackers can be hedge- hogs (they only need to know one attack method, but do it well) while defenders must be foxes (they need to know everything; not just technical knowledge, but knowledge of networking, software, law enforcement, psychology, etc.). Back in 2004–2005 when there was less ability to attack, the trend lines for attack and defend were close, but they have since diverged.

Top-tier companies will be able to secure themselves and follow new Payment Card Industry guidelines (e.g., use of chip and PIN systems), but mom-and- pop stores will be hurt because they may not be able to keep up with these new security requirements imposed on them. • Black markets will require better encryption, vetting, and operational security due to the dynamic give-and-take between black-market actors and law enforcement and security vendors.

Participants will employ innovative methods and tools to help obfuscate, encrypt, or make a transaction quicker, easier to use, and harder to find. 1 E.g., 64-bit ZeuS uses Tor as a communications platform (Kirk, 2014).

32 Markets for Cybercrime Tools and Stolen Information: Hackers’ Bazaar Figure 6.1 Black Market Timeline RAND RR610-6.1a Late 1980s 1990s Black markets emerge, especially in Warsaw Pact countries 2000 Black market is mostly paper based (e.g., credit card numbers on a notebook pad); transactions are done by hand Identity theft booms, fraud is in its early stages (still human- based, not yet cyber) Majority of hackers are lone-wolf or small groups of individuals Black market consists of tightknit ad hoc networks, mostly among the technologically savvy Fewer than 10 percent of data theft crimes had a digital nexus, or electronic connection Rapidly spreading email worms and viruses are popular (though not present on black market); examples include: Slammer, Sasser, ILOVEYOU, and Code Red 20052001 200420032002 Message boards for carders and hackers emerge (e.g.

Shadow- Crew and CarderPlanet) Backdoors and Trojans emerge and replace worms/ viruses; not widely available on the black market Roughly half of data theft crimes have a digital nexus, or electronic connection DDoS emerges on black market as a service for adware (pay per install) Carding market grows; consists of ad hoc groups with very little cross- communication Increase of Trojans in market Phishing attacks develop; attacks are crude, rife with bad grammar and spelling Intrusion of TJ Maxx/TJX, resulting in the largest data breach thus far of ~94M records (not reported until 2007) Structure Participants Products Attacks Notable data breach

projections and predi ctions for the Black Market 33 Structure Participants Products Attacks Notable data breach Exploit kits become available on the market, increasing the ease-of-entry for non-technical players 20072006 2008 2009 2013201220112010 Black market players migrate into more organized forums (mostly carder) As-a-service goods (especially botnet-related) increase ZeuS Family emerges (tool, botnet, and Trojan malware); a few variants pop up infrequently.

Variants of ZeuS (Citadel, GameOver, etc.) become proliﬁc Breach of Heartland Payment Systems, currently the largest ever data breach due to attack (~130M records) State-sponsored groups develop; start to see state-sponsored hacking by Russia, China, Romania, Ukraine, Middle East, cartel- controlled Central America, etc.

Number of new exploit kits available on the market spikes as trade activity and competition takes off The number of exploit kits in the market increases dramatically due to more “interesting” vulnerabilities Crude phishing attacks are phased out and replaced by sophisticated spear-phishing and highly legitimate presentation formats (e.g. of fake website) Breach of Target during holiday shopping season (~70M records); stolen data on black market forums within days Initial awareness (and public discussion) of sophisticated levels of attack (i.e.

APT-level) Phishing attacks are common place Dark web transactions become more prevalent Initial entry of mobile malware, phishing, and SMiShing Layering encryption on top of communications becomes popular Marketplace is dominated by more disciplined, organized, and structured groups that often identify speciﬁc targets ZeuS source code is leaked on the Internet, leading to boom of customized versions

34 Markets for Cybercrime Tools and Stolen Information: Hackers’ Bazaar • Crime will increasingly have a networked or cyber component; vulnerabilities will continue to persist and all agree that the human element will continue to be a weak point. More and more interactions depend on some sort of network, digital, or computer component. Unpatched vulnerabilities (for vulnerabilities that have a patch) will remain in systems until techniques for automatic deployment of patches to users are developed and implemented. Additionally, spear-phishing campaigns will continue to grow more sophisticated.

Agreed-Upon Projections and Predictions for Shifts in Targets • There will be more targets, as more data become digital. Today’s organizational crown jewels are built of bytes. Back in 2003, physical security was most important to secure a company’s most valuable information or goods. Today, everything is on a network—even medical records. • h yper connectivity opens up more points of presence for attack and exploitation. By 2020, the number of connected devices will outnumber the number of connected people by a ratio of 6:1 (Evans, 2011).

IPv6 will allow for people and devices to be connected, accessed, and used in a way that is impossible now (Porche et al., 2013) 2—eventually, this may introduce better security, but initially, it enables a greater threat landscape. The Internet of Things continues to evolve; even people who might patch their computers may forget to patch everything else they own that is network-connected. • e xplo itation of social networks and mobile devices will continue to be growth areas.

The development of mobile malware for Android devices (70 percent of all mobile attacks) is likely to continue until Google, device manufacturers, and service providers work together to find a way of delivering updates and patches to users as they come out (only 12 percent of Android devices have been updated to the versions that prevent pre- mium SMS charges being run up on the phones of unsuspecting users). Agreed-Upon Projections and Predictions for Shifts in Attack Characteristics • Attackers will continuously innovate and change tactics.

There will be more double- pronged or multistep attacks (series of attacks), with a lot more creativity and misdirec - tion (e.g., something that looks like a DDoS, but is actually an exfiltration).

There will be an increase in attacks that are made to order and that may have a long-lasting damaging effect, more ransomware and cryptlocker-type attacks that encrypt a user’s personal files and demand a ransom to unlock, more polymorphic malware (which is slightly different with every installation so it can escape detection by antivirus vendors), more VM-aware malware that can evade being analyzed by malware analysts, and more stealth overall. • There will be a shift away from stealing credit card and financial credentials because markets are flooded with them.

The first wave of stealing data at the processor level has plateaued a bit. Once a breach has occurred, actors usually wait a little while before another 2 IPv6 is the next generation of Internet protocol—how network traffic moves.

projections and predi ctions for the Black Market 35 attempt. This is to avoid flooding the market and driving down prices. 3 Experts believe that there tends to be a lapse of a few years between large breaches (e.g., TJ Maxx/TJX in 2005–2006, 94 million accounts; Heartland in 2008–2009, 130 million accounts; Target in 2013, 70 million accounts), although there will certainly still be a steady flow of breaches. Figure 6.2 shows the biggest data breaches in history as a result of hacking (versus inside job or poor security practices). • There will be more hacking for hire, as-a-service offerings, and brokers.

This con - cept of outsourcing technical ability significantly lowers the bar for anyone wishing to get involved in the black market. Although as-a-service models will continue to grow (Glenny, 2009), there may be some changes—particularly how those providing the ser - vice store data, customer lists, and logs. 4 Figure 6.3 is one representation depicting how the growth of as-a-service models and plug-and-play interfaces has lowered the required technical knowledge of an actor to be able to implement an attack.

Agreed-Upon Projections and Predictions for Shifts in Participants • Digital natives will run the market, and the number of u .S.- based actors will con - tinue to increase. People are becoming more technically sophisticated; younger genera - tions are using technology on a daily basis in school, learning digital technology at a very early age. In the words of one expert, “hacking has become little league: everyone starts out early, and spends a lot of time doing it.” • Law enforcement may become a victim of its own success.

More arrests and takedowns mean more media coverage, making hackers more aware of the opportunities provided by black markets. Those already in the market grow smarter as they learn from law enforce- ment’s investigative techniques, complicating law enforcement’s job. Additionally, much of what U.S. law enforcement does, and can do, is based on older, less restrictive laws. Future laws, if developed with today’s privacy concerns in mind, may restrict what U.S. law enforcement can do (e.g., how search warrants are done, how information is gathered).

That said, there is an underreporting of problems, so a majority of breaches never get disclosed, a trend that may get reversed as more companies grow comfortable coming forward. • The best hackers are likely to leave the black market for the gray market. Average hackers, consequently, will remain and can rise to the top of the black market. Contested Projections and Predictions Experts had differing viewpoints on some issues. Here are a few topics that generated disparate projections and predictions: • most-likely victims or targets of attack.

One expert says markets will move downscale because the larger stores can better defend themselves and have better protection mea - 3 There can be the issue of too many similar goods in the market; e.g., the Target breach (Kirk, 2014). 4 For example, with the takedown of the Blackhole Exploit Kit, customer lists and data are now in the hands of law enforcement personnel, which may make some nervous.

36 Markets for Cybercrime Tools and Stolen Information: Hackers’ Bazaar Figure 6.2 Hacking Data Breaches by Size SOURCE: InformationisBeautiful, undated. Used under Creative Commons Attribution-NonCommercial 3.0 licensing guidelines. NOTE: The different shades of blue represent various years, and the orange represents an “interesting story.” RAND RR610-6.2 2012 2011 2010 2009 2008 2007 2013 2006

projections and pre dictions for the Black Market 37 sures. Another argues that there will be a shift to large organizations that give more of a bang for the attack buck; these are vulnerable to attack given their greater number of points of presence. Yet others say size is irrelevant; any organization with an open or vul- nerable point of presence or port is a target. • valuing IP. Some say attacks on IP and proprietary information are likely to rise, as state- paid hackers seek more intelligence on businesses and their financiers.

Others observe that getting intellectual property (i.e., conducting espionage) requires a level of sophisti- cation and targeted attack that very few players have, and that the take from such crimes is hard to monetize. • vulnerability of products that are no longer supported. Some say the easy pickings that work against Microsoft XP are likely to dry up within two years as enterprises move to more secure platforms (e.g., Windows 7 and beyond).

Others say vulnerable systems will always exist, and lower-tier hackers will continue to focus on XP and age-old attacks, even though they are not “big-dollar hacks.” • targeted attacks versus mass attacks. Some argue that the future will see more persis - tent, targeted attacks rather than opportunistic, mass “smash-and-grab” attacks. Others foresee more mass, orchestrated attacks, notably by state-sponsored hackers. Figure 6.3 Attack Sophistication versus Intruder Technical Knowledge SOURCE: Image courtesy Carnegie Mellon University. RAND RR610-6.3

38 Markets for Cybercrime Tools and Stolen Information: Hackers’ Bazaar • growth rate of the black market. While all agree that the black market is growing, there is debate regarding the rate of growth. Some say the black market is growing geo - metrically because it is “stupid simple” to make malware. Others say the growth rate will mirror the growth rate of the noncriminal world and the use of new consumer technol - ogy. Still others maintain that the growth rate depends on the type of crime (financial, mass, targeted, etc.), and each type has to be considered separately. Finally, some say no baseline exists to accurately judge the rate of growth.

CHapTer Se Ven Conclusions Since the mid-2000s, the hacking community has been steadily growing and maturing, as has its market. It took more than a decade of continuous development and innovation, the introduction of new generations of digitally savvy participants, and significant trial and error to achieve today’s landscape. The black market does not differ all that much from a traditional market or other typical criminal enterprises; participants communicate through various chan- nels, place their orders, and get products.

Its evolution mirrors the normal evolution of a free market with both innovation and growth. The black market can be more profitable than the illegal drug trade, in that the links to end-users are more direct, and because worldwide distri- bution is accomplished electronically, the requirements are negligible. As with any other market, goods and vendors in the market tend to be reliable—although bad actors do exist—and if you can get scammed (or not notice an extra “feature” in your purchase), you will be.

As suspicion and “paranoia” spike because of an increase in recent takedowns, more transactions move to the darknet; stronger vetting takes place; and greater encryption, obfuscation, and anonymization techniques are employed, restricting access to the most sophisticated parts of the black market. That said, the cost to play (once in) is low because of the proliferation of as-a-service and point-and-click interfaces, and the cost to enter—at least at the most basic level—is quite reasonable because of the availability of “how-to” informa - tion.

Law enforcement is getting better for a number of reasons: More individuals are techno- logically savvy; suspects are going after bigger targets, and thus are attracting more attention; and more crimes involve a digital component, giving law enforcement more opportunities to encounter crime in cyberspace. Yet, despite the growing rate of takedowns, the black market remains resilient and is growing at an accelerated pace, continually getting more creative and innovative as defenses get stronger, law enforcement gets more sophisticated, and new exploit- able technologies and connections appear in the world.

Products can be highly customized, and players tend to be extremely specialized. The black market, once a varied landscape of discrete, ad hoc networks of individuals motivated by ego and notoriety, has now become a burgeoning powerhouse of highly orga - nized groups, often connected with traditional crime groups (e.g., drug cartels, mafias, terrorist cells) and nation-states. The market for zero-days is a niche aspect of the black market, and has its own place in the legitimate “gray” market.

We can expect the underground market to continue to grow and be more relevant, con- tinue to innovate and adapt, and continue to mature.

CHapTer eIGHT For Future Research The deleterious effects of black markets on cybersecurity suggest the need for options in sup - pressing such market activity, without which very little is likely to change.

Such a search would raise several questions: • How might bug bounty programs or better pay and incentives from legitimate companies shift transactions and talent off the illicit markets into legitimate business operations? • What are the costs and benefits of establishing fake credit card shops, fake forums, and sites to increase the number and quality of arrests, and otherwise tarnish the reputation of black markets? • What benefit might there be by hacking back, or including an offensive component within law enforcement that denies, degrades, or disrupts black-market business opera - tions?

Would this do more harm than good? • How efficient or effective is it for banks or merchants to buy back their customers’ stolen data (e.g., Krebs, 2013h)? • Would implementing mandates for encryption on point-of-sale terminals, safer and stron- ger storage of passwords and user credentials, worldwide implementation of chip and PIN systems (already starting to happen with new standards to be in place in 2015), and regu- lar checks of websites to prevent common vulnerabilities put a dent in the black market, or enforce significant changes to how the market operates?

Would making noncompliant companies liable for data breaches decrease activity on the markets? • What lessons learned from the black market for drugs or arms merchants could be applied to the black market for cybercrime? • What is the best or most effective strategy for law enforcement: to go after the small number of top-tier operators (hardest to do), or the lower- or open-tier participants? • How likely is it for governments and law enforcement worldwide to work with each other to agree to persecute and extradite when appropriate, and to coordinate for physical arrests and indictments? • How should computer security and defense companies shift their approach to thwart attackers and attacks?

43 a ppenDIX a Text of the Black Market Timeline We include the full text of the timeline graphic below. A majority of this information was com- piled from our interviews with experts: • Late 1980s–early 1990s: People start getting involved in the black market, especially in former Warsaw Pact countries blessed with plenty of good programmers and mathemati- cians suddenly out of work.

There are cases of selling corporate espionage services to steal IP, but not through the black market (Glenny, 2009). • 1990s: The black market is mostly paper-based (e.g., credit card numbers on a notebook pad), with transactions done by hand prior to the proliferation of computing devices. • Late 1990s–early 2000s: A shift of black-market activity begins, from being mainly individuals to mainly groups—but groups of those with close personal, cultural, or com - munity connections. • 1996–2004: Groups of individuals, crews (e.g.

Shadowcrew, Carderplanet), and organi- zations start to get more organized and more sophisticated (by 2001, websites for goods look professional). • Late 1990s–early 2000s: Access to computing technology becomes more prevalent; more computers on college campuses lead to younger generations more familiar with technology. • Late 1990s: Fewer than 10 percent of crimes have a digital nexus, or electronic connec - tion. • 1999: A boom of identity theft, as more people provide information about themselves to others (e.g. for credit cards, lines of credit, etc).

Early stages of fraud (human-based, not cyber) begin. • 2000: The concept of valuable data grows, including more than credit card data (i.e., PII and PHI). • 2000–2002: A majority of hackers are lone wolves or small groups of individuals (Glenny, 2013). • 2000–2004: There is an explosion of rapidly spreading email worms and viruses. Ini - tially, these are “probative,” later, they start to do damage to machines. Examples include Slammer, Sasser, ILOVEYOU, and Code Red. These are written by individuals (not the black market), and largely for notoriety.

At first, “attacks came with press releases,” in that the author wants to be known; as they start to do damage, attacks get stealthier. • e arly 2 000s: Roughly half of crimes have a digital nexus or electronic connection. • 2002: ShadowCrew and CarderPlanet message boards emerge for carders and hackers.

44 Markets for Cybercrime Tools and Stolen Information: Hackers’ Bazaar • 2003–2004: Backdoors and Trojans increase; things that could actually take an action, and do something. These had been around since the mid- to late-1990s with BackOrifice (1998), but they become more popular in 2003–2004 when crime starts to be mixed in (unlike a worm/virus that just spreads on its own). • 2003–2004: The black market consists of tight-knit ad hoc networks, mostly among those who are technologically savvy or who have a connection to those types of people. • 2003–2

Document details

Collection	California Superior Local Rules
Citation	CCC-248130
Type	court_rule
Language	en
Format	pdf
Source	CA_LOCAL
Identifier	0f3b4559432a04c174591774d37f55b7a76e1bac

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