The National Security Agency, the top U.S. electronic intelligence service, has joined a probe of the October cyber attack on Nasdaq OMX Group Inc. (NDAQ) amid evidence the intrusion by hackers was more severe than first disclosed, according to people familiar with the investigation.
The involvement of the NSA, which uses some of the world’s most powerful computers for electronic surveillance and decryption, may help the initial investigators -- Nasdaq and the FBI -- determine more easily who attacked and what was taken. It may also show the attack endangered the security of the nation’s financial infrastructure.
“By bringing in the NSA, that means they think they’re either dealing with a state-sponsored attack or it’s an extraordinarily capable criminal organization,” said Joel Brenner, former head of U.S. counterintelligence in the Bush and Obama administrations, now at the Washington offices of the law firm Cooley LLP.
The NSA’s most important contribution to the probe may be its ability to unscramble encrypted messages that hackers use to extract data, said Ira Winkler, a former NSA analyst and chief security strategist at Technodyne LLC, a Wayne, New Jersey-based information technology consulting firm.
The probe of the attack on the second biggest U.S. stock exchange operator, disclosed last month, is also being assisted by foreign intelligence agencies, said one of the people, who declined like the others to be identified because the investigation is confidential and in some cases classified. One of the people said the attack was more extensive than Nasdaq previously disclosed.
Motive Undetermined
Investigators have yet to determine which Nasdaq systems were breached and why, and it may take months for them to finish their work, two of the people familiar with the matter said.
Disclosure of the attack prompted the House Financial Services Committee in February to begin a review of the safety of the country’s financial infrastructure, according to the committee’s chairman, Spencer Bachus, an Alabama Republican.
The widening investigation may also complicate Nasdaq’s ability to strike deals to buy or merge with other exchanges at a time when several competitors have announced such moves, according to Alexander Tabb, a partner at Tabb Group LLC, a financial-markets research firm based in Westborough, Massachusetts.
“For an organization like Nasdaq, it does have an impact on the overall perception of their security, their resiliency and their value,” Tabb said. “For potential partners of the company, that has to be a concern.”
Exchange Acquisitions
More than $20 billion of exchange acquisitions have been announced in the past five months, including Singapore Exchange Ltd.’s $8.3 billion offer for ASX Ltd., London Stock Exchange Group Plc’s agreement to acquire TMX Group Inc. for $3.1 billion, and Deutsche Boerse AG (DB1)’s $9.5 billion deal for NYSE Euronext. (NYX)
Nasdaq operators will be hard pressed to assure potential partners that they have resolved the matter, Tabb said.
“Uncertainty in the functioning of the market is the biggest blow-back to this event,” Tabb said.
Nasdaq reported in February that the breach of its computers was limited to a single system known as Directors Desk, a product used by board members of companies to exchange confidential information. The company said that as far as investigators could determine, no data or documents on that system were taken.
Other Systems
The NSA-assisted probe is now focused on how far the attack may have reached, including the breach of other systems, said one of the people familiar with the probe.
Frank De Maria, a Nasdaq spokesman, declined to comment on the effect the security breach might have on the company’s future strategic moves. He said Nasdaq is pursuing its probe and has no new information about the scope of the attack.
“With every company now, searching the networks for break- ins and insuring they’re secure has got to be a full-time job,” De Maria said in an interview.
NSA spokeswoman Vanee Vines declined to comment and referred all questions to the Federal Bureau of Investigation, the lead agency in the investigation. Jenny Shearer, a spokeswoman for the FBI, declined to comment.
Directors Desk, where the break-in was discovered, is designed to allow directors and executives of Nasdaq client companies to share private files, nonpublic information that cyber criminals could trade on. Nasdaq bought Directors Desk in 2007 as part of its effort to diversify into corporate services.
Sophisticated hackers often enter computer networks through a single system, like Directors Desk, then hop to other secure parts of a computer network, the people familiar with the investigation said.
Network Vulnerabilities
Tabb said investigators are likely trying to chart which parts of Nasdaq’s network might have been accessible through Directors Desk and to ensure those vulnerabilities weren’t exploited -- a time-consuming process, he said.
Brenner, the former counter-intelligence chief, said he couldn’t independently confirm the NSA’s role in the probe. He said the agency rarely gets involved in investigating cyber attacks against companies.
Brenner said that the NSA played a part in probing the 2009 attack against Google Inc. (GOOG), saying that represented “a major change” for the agency, which monitors the electronic communications of foreign entities and helps secure the networks of U.S. government agencies.
“It’s part of an increasing awareness that the distinction between economic and national security is rapidly breaking down,” he said.
Unique Tools
The NSA, based at Fort Meade, Maryland, has the government’s most detailed knowledge of cyber attackers and their methods, Brenner said. A 2008 executive order signed by President George W. Bush expanded the NSA’s responsibilities to include monitoring U.S. government computer networks to detect cyber attacks.
The NSA could help identify and analyze electronic clues left behind by the hackers, including communication between the malicious software used in the attack and the outside computers that controlled it, Winkler said.
One challenge in analyzing the scope of cyber attacks is that the information captured by intruders is often sent out in an encrypted form, making it difficult to tell what was taken, according to the FBI.
Stealthy Software
Another obstacle, Brenner said, is that the most sophisticated cyber attacks employ stealthy software that’s programmed to go dormant for months and can be altered by hackers in response to changing security measures. That makes it difficult for investigators to be sure they’ve found all the malicious software and removed it from the network.
“In theory, the NSA should have the ability to reconstruct the data that is being obfuscated,” said Winkler, the former NSA analyst.
One line of inquiry pursued by investigators is whether the attack is linked to state-based cyber espionage or sabotage, which would raise national security concerns, one of the people familiar with the probe said.
De Maria, the Nasdaq spokesman, said in February that there was no evidence the trading platform the company runs was breached. Security dangers include the potential for intruders to alter trading algorithms and cause a market crash, according to Larry Dignan, who writes for ZDNet, a technology publication that’s a unit of CBS Interactive.
Doubts on Trades
Brenner said intruders might do just as much damage by manipulating trading to create doubt about the validity of trades. More than 93 billion shares were traded on the Nasdaq exchange in the fourth quarter of 2010, equal to almost 20 percent of the U.S. equities market, according to the company’s final quarterly report to the Securities and Exchange Commission last year.
Initial reports that the computers used in the attack were based in Russia weren’t correct, the people familiar with the probe said. The investigation has yet to determine the origin of the attack, they said.
The attack’s sophistication doesn’t rule out that an organized crime group was responsible, Brenner said. Criminal enterprises have narrowed the skills gap with state-sponsored hackers, launching attacks that can penetrate even the best- guarded computer networks, he said.
To contact the reporter on this story: Michael Riley in Washington at michaelriley@bloomberg.net.
To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.
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