Waledac Botnet Reappears as New Password Stealing Variant

Waledac has reawakened more than a year after Microsoft shut down the botnet. However, the new incarnation has far more dangerous capabilities as it steals passwords.

The Waledac spam botnet has reawakened, and its new password-stealing capabilities make it a much more dangerous threat than the older one Microsoft shut down more than a year ago, according to Palo Alto Networks.

Computers infected with the new variant of Waledac still send out spam, but the malware has added capabilities to steal passwords and authentication information from compromised systems, said Wade Williamson, a senior security analyst at Palo Alto Networks. Palo Alto Networks first detected the new variant on Feb. 2 in customer networks, Williamson said. It publicized its findings on Feb. 15.

The new Waledac malware sniffs user credentials for FTP, POP3 and SMTP accounts as well as stealing configuration files for FTP and BitCoin, the virtual currency often used for online transactions. The core behavior, communications methods, internal operations and delivery mechanism remain the same, said Williamson. The source code is essentially the same, Palo Alto Networks has determined.

Waledac is back, but the gang behind it is "being much more quiet and trying to stay under the radar this time," said Williamson.

Microsoft "famously" took down the Waledac botnet by seizing the malicious domains associated with the botnet and law-enforcement authorities seized command-and-control (C&C) servers in 2010. Since then, Waledac "wasn't there at all," Williamson said.

Before its takedown, Waledac was a "decent-sized" spam botnet that accounted for about 1 percent of the global spam volume. Unlike its newer variant, the original Waledac was devoted to spewing out spam as fast as it could to as many targets as possible. While it was not pleasant for enterprises to have a spam bot operating on their networks, the impact was generally limited to just higher bandwidth bills and network congestion, said Williamson.

The new Waledac is easily "more dangerous" because it is capable of sifting out log-in credentials and sensitive information and transmitting it to external adversaries to use in other attacks. Recent events have shown that serious breaches and compromises could be traced back to having the password on an email account stolen, said Williamson.

In fact, attackers relied on log-in credentials stolen from seven senior executives to break into Nortel Networks in 2000, according to a Feb. 14 report in The Wall Street Journal about the decade-long security breach.

Williamson noted that even though the source code is essentially the same, the current threat is a variant of the original botnet and uses new domains and command-and-control servers. The new Waledac also uses proxies and exhibits other dynamic behavior when looking for the C&C server to connect to, said Williamson.

Palo Alto Networks is still analyzing the variant, and it was still too soon to speculate whether the group behind the original Waledac has resumed operations, or if a brand-new group had somehow acquired the code, said Williamson. It is clear, however, that criminals are reusing infrastructure and techniques that have been proven to work.

The Waledac sighting comes a few days after Kaspersky Lab researchers discovered a new variant of the Kelihos botnet. The new samples are based on original Kelihos code but use different encryption keys, said Maria Garnaeva, a Kaspersky researcher. Like its predecessor, the latest Kelihos is also sending out large volumes of spam.

"It means that we are dealing with another botnet," said Alex Gostev, chief security expert of Kaspersky Lab.

Kelihos was taken offline last September after Microsoft seized the domains used by the C&C infrastructure. Microsoft was aided in its efforts by Kaspersky Lab. As part of the takedown, Microsoft introduced a new server into the botnet infrastructure and pushed out the IP address to all the infected machines to connect to this server instead of other malicious ones.

"It appears [a] new botnet infrastructure may be being built with the new variant of Kelihos malware," Richard Boscovich, senior attorney in Microsoft's digital crimes unit, wrote Feb. 3 on Microsoft's Technet blog.

Like Waledac, Microsoft still has control over the original Kelihos botnet. The C&C servers that had controlled Kelihos are not sending any commands to infected machines, and no spam is being sent by the machines infected with the earlier version of the malware, according to Gostev.

The fact that both botnets reappeared around the same time is interesting, as security experts believe Waledac source code was used in developing Kelihos.

It's really difficult to tell at this point whether the perpetrators are resuming operations, having learned some lessons from the takedown, or if the code has been sold to newcomers, said Williamson.