U.S. government recovered millions of dollars paid in Colonial Pipeline hack ransom

The Justice Department recovered $2.3 million in cryptocurrency ransom that Colonial Pipeline paid to hackers whose cyberattack last month shut down its major East Coast pipeline, leading to gas shortages up and down the East Coast, authorities said.

Deputy Atty. Gen. Lisa Monaco said the FBI on Monday seized the majority of the ransom that Colonial Pipeline paid to hackers who used malware developed by DarkSide, a Russia-linked hacking group, to encrypt and lock up the company’s computer systems. The company, which Monaco credited with quickly alerting the FBI to the attack, said it paid the hackers $4.4 million in bitcoin to regain access to its systems.

“Today we turned the tables on DarkSide,” Monaco said, calling such ransomware attacks an “epidemic” that poses a “national security and economic threat” to the U.S. “This was an attack against some of our most critical infrastructure.”

Though the malware did not affect systems that operate the company’s pipelines, which stretch from New Jersey to Texas, Colonial discovered the hack on May 7 and closed its spigots for five days out of an abundance of caution. The pipeline supplies about 45% of the jet fuel, gasoline and heating oil consumed on the East Coast, and the shutdown sparked panic from drivers, who raced to top off tanks, leading gas stations to run out of fuel.

The Justice Department did not disclose how much Colonial paid in ransom, but the company’s chief executive told the Wall Street Journal last month that it made a $4.4-million payment in bitcoin. Colonial CEO Joseph Blount said the company paid the extortion demand because he was concerned a prolonged disruption of the pipeline would hurt the nation.

“I know that’s a highly controversial decision,” Blount told the newspaper. “I didn’t make it lightly. I will admit that I wasn’t comfortable seeing money go out the door to people like this.”

Ransomware hackers typically trick unwitting employees into opening an email and clicking on an attachment or a link, which then infects computer servers with malware that encrypts data and locks the systems. Victims must pay a ransom to the hackers to obtain a decryption key to unlock and recover the information. DarkSide’s malware poses a double whammy — it can also siphon out information, giving hackers more leverage because they can threaten to disclose sensitive data if they are not paid.

FBI Deputy Director Paul Abbate said DarkSide produces ransomware that it sells to hackers who conduct cyberattacks and share a percentage of their proceeds with the malware’s developers. DarkSide’s product is one of about 100 ransomware variants the FBI is investigating, Abbate said.

The bureau has been investigating DarkSide since last year, Abbate said, and has identified more than 90 victims of its ransomware in manufacturing, legal, insurance and healthcare industries. Working with other U.S. government agencies, the FBI identified “a virtual currency wallet” that the DarkSide hackers were using to collect payment from a victim, Abbate said.

The Justice Department then obtained a warrant to seize those bitcoins, officials said.

“The old adage ‘follow the money’ still applies,” said Monaco, the deputy attorney general. “That’s exactly what we do.”

The Colonial Pipeline attack was the latest in a series of ransomware assaults that has crippled government agencies, hospitals and businesses, including a major meat producer that was forced last week to idle plants, sparking concerns about potential increases in meat prices and shortages. A task force of more than 60 experts from industry, government and nonprofits issued a report in April that calls ransomware “a flourishing criminal industry that not only risks the personal and financial security of individuals, but also threatens national security and human life.”

The report, published by the nonprofit Institute for Security and Technology, estimates that nearly 2,400 governments, healthcare facilities and schools were victims of ransomware attacks last year. Ransom payments rose to $350 million last year, a 300% increase over 2019, the report says. The average such payment topped $300,000.

Cybersecurity experts and former federal prosecutors and agents blamed several trends for the increase. The rise of difficult-to-trace cryptocurrency has made it far easier for criminal gangs to collect payments, the experts said. Cybercriminals have also begun to increasingly operate within the borders of U.S. adversaries, particularly Russia. The Kremlin, for example, allows hackers to operate with impunity if they do not target Russian businesses or citizens and focus their energy on sowing chaos and confusion in the West.

The Biden administration is seeking to find ways to combat the rise. President Biden said he will discuss ransomware attacks this week with U.S. allies during a European trip, and bring up the subject during a June 16 meeting with Russian President Vladimir Putin. The Justice Department has launched a task force to better coordinate its approach to the crime wave. Justice Department officials said the Colonial Pipeline ransom seizure was the first such payment recovery by the task force. Justice Department officials could not say how many other ransoms they have recovered.

“This is a big deal,” said Scott Jasper, a lecturer at the Naval Postgraduate School and author of “Russian Cyber Operations: Coding the Boundaries of Conflict.” “The question is: Will this be big enough to change the behavior of DarkSide or of other cyber actors? It’s too early to tell. It’s a slow game, a long-term game. This is a significant, big business. This is a big enterprise.”