Microsoft knew of SharePoint security flaw but failed to effectively patch it, timeline shows

By James Pearson

LONDON (Reuters) -A security patch released by Microsoft earlier this month failed to fully fix a critical flaw in the U.S. tech company's SharePoint server software that had been identified at a hacking competition in May, opening the door to a sweeping global cyber espionage operation, according to a timeline of events reviewed by Reuters.

A Microsoft spokesperson confirmed on Tuesday that its initial solution did not work. The spokesperson added that Microsoft had released further patches that fixed the issue.

It remains unclear who is behind the ongoing operation, which targeted around 100 organisations over the weekend and is expected to escalate as other hackers join the fray. Microsoft said in a blog post that two allegedly Chinese hacking groups, dubbed "Linen Typhoon" and "Violet Typhoon," were exploiting the vulnerabilities, along with another China-based hacking group.

Microsoft and Alphabet's Google have said that China-linked hackers were likely behind the first wave of hacks.

Chinese government-linked operatives are regularly implicated in cyberattacks, but Beijing routinely denies carrying out hacking operations. In an emailed statement, the Chinese embassy in Washington said China opposes all forms of cyberattacks, and "smearing others without solid evidence." 

The vulnerability that facilitated the attack was first identified in May at a hacking competition in Berlin organised by cybersecurity firm Trend Micro, which offered cash bounties for the discovery of computer bugs in popular software.

It offered a $100,000 prize for "zero-day" exploits - which are called that because they leverage previously undisclosed digital weaknesses that could be used against SharePoint, Microsoft's flagship document management and collaboration platform.

A researcher working for the cybersecurity arm of Viettel, a telecommunications firm operated by Vietnam's military, identified a SharePoint bug at the event, dubbed it "ToolShell" and demonstrated a method of exploiting it. 

The researcher was awarded $100,000 for the discovery, according to a post on X by Trend Micro's "Zero Day Initiative."

In a statement, Trend Micro said it was the responsibility of vendors participating in its competition to patch and disclose security flaws in "an effective and timely manner."

"Patches will occasionally fail. This has happened with SharePoint in the past," the statement said.

Microsoft said in a July 8 security update that it had identified the bug, listed it as a critical vulnerability, and released patches to fix it. 

About 10 days later, however, cybersecurity firms started to notice an influx of malicious online activity targeting the same software the bug sought to exploit: SharePoint servers.

"Threat actors subsequently developed exploits that appear to bypass these patches," British cybersecurity firm Sophos said in a blog post on Monday. 

The pool of potential ToolShell targets remains vast.

According to data from Shodan, a search engine that helps identify internet-linked equipment, over 8,000 servers online could theoretically have already been compromised by hackers.

Those servers include major industrial firms, banks, auditors, healthcare companies, and several U.S. state-level and international government entities. 

The Shadowserver Foundation, which scans the internet for potential digital vulnerabilities, put the number at a little more than 9,000, while cautioning that the figure was a minimum. 

It said most of those affected were in the United States and Germany, and the victims included government organisations.

Germany's federal office for information security, BSI, said on Tuesday it had found SharePoint servers within government networks that were vulnerable to the ToolShell attack but none had been compromised.

(Reporting by James Pearson; Additional reporting by Raphael Satter and AJ Vicens; Editing by Joe Bavier and Rod Nickel)