
In episode 403 of “Smashing Security” we dive into the mystery of $65 million vanishing from Coinbase users faster than J-Lo slipped into Graham’s DMs, Geoff gives a poor grade for PowerSchool’s security, and Carole takes a curious look at QR codes.
All this and more is discussed in the latest edition of the “Smashing Security” podcast by cybersecurity veterans Graham Cluley and Carole Theriault, joined this week by The Lazarus Heist’s Geoff White.
Warning: This podcast may contain nuts, adult themes, and rude language.
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Hello, hello, and welcome to Smashing Security episode 403. My name's Graham Cluley.
It is, of course, the star of the Lazarus heist and various other activities. It's Geoff White.
Been keeping up with the rolling chaos that is the incoming Trump administration, and I've got various projects in the work and things in the pipeline which I'm working on, so I'm busy, which is good.
What wisdom have we shared with the wider population, do you think, after all these podcasts?
You've hopefully learned to use a password manager and have unique, hard-to-crack passwords. Yeah.
Hmm.
Not because following any of those behaviors is actually bad for your security, but because it might make you look suspicious. That's their argument.
It's not that it's bad for your security. It's because it makes you look suspicious because you're securing yourself.
I mean, I would look suspicious if I was dating Jennifer Lopez, not just because I fancy Diana Rigg more than Jennifer Lopez.
Although that would also be suspicious, as she has been dead for some years.
And why are they saying that implementing security makes you look suspicious? Can you name names?
But some people have been having trouble with Coinbase lately. It turns out many Coinbase users have reported sudden restrictions on their accounts.
So there is a chap we've spoken about him before in his work called Zackxbt. Sounds like a rapper.
He's recently mentioned in a thread on Twitter that folks are fuming that they have been locked out of their Coinbase accounts.
And he posted a screenshot of dozens and dozens of Coinbase users reporting that they cannot access their accounts any longer, and they've been given no reason.
I've been trying to contact support all day. I've been refreshing the app nonstop. Nothing." He says, "I thought I could trust this platform.
Now I'm not even sure I'll get any of my money back." Justin Taylor said, "Locked out of my Coinbase account. Verification keeps failing.
WTF is happening." Eric, poor old Eric, he says, "Just locked out of my account after trying to send $25,000 worth of crypto." A guy called Nas says, "Out of the blue, Coinbase restricting my account." And he says it gives him restriction instructions.
It says, "Please visit the support page." When he goes to the support page, it goes, "Please follow the restriction instructions." So he's in this endless loop.
He says, "It's the worst customer support experience ever." A guy called The Bogfather says, "Coinbase has trapped my funds for two months with no explanation.
I can't trade out of my current positions. This is egregious.
Nobody should use an exchange that does this." Because of course, if you've got your funds trapped in a particular place and you're desperate to sell, it's horrendous.
If you're handling anything to do with US dollars or US citizens, you know, US money laundering legislation will kick in.
But no, to your point that you're right, they're not regulated in the same way as banks are.
But what's interesting, Graham, is from going back to the start, what you were saying is that when people have implemented, you know, things like VPNs and so on, that's what's triggering these Coinbase problems is that people have tried to implement a security thing.
Not each of them, but $300 million per year, he reckons, is being lost to social engineering scams on Coinbase.
And so ZackXBT, he's got this buddy Tanuki42, and he and Tanuki42 have been investigating this, and they say that they've seen evidence that $65 million was stolen from Coinbase users between December and January.
And that, they reckon, is a huge underestimate. The true number is likely to be much higher because these are only the thefts that they know about.
They've seen evidence on the blockchain or they've had shared with them by victims rather than based on any information from Coinbase or police reports.
But, you know, this is a very common type of theft today.
Yeah, in the UK we're trying to work out, I think crypto is now recognized as a thing in the UK. It's recognized as an actual asset in the UK.
So when it's stolen, you know, it should be recognized as having a property stolen. But of course, you know, going down to your local cop shop and saying, oh, I've lost my crypto.
I'm not quite sure what kind of response you'd get to that.
They used personal information obtained from private databases to gain their trust. So they knew information about their victim. Now, that isn't revolutionary.
We've seen those kind of scams in the past, obviously, many times before. And what people don't realize is Coinbase will never, ever call you.
But when they did call, when the scammer called, they told the victim their account had had multiple unauthorized login attempts. So people kept on trying to log in.
They then sent a spoofed email to the user, which appeared to come from Coinbase support with a fake case ID. Further gaining the trust of the victim.
But that then instructed the victim to transfer funds to a Coinbase wallet and whitelist that address while support, in quotes, verified the account security.
So obviously that's where the scam takes place, is that the money is then moved.
They're using what are called panels, which are being openly sold on cybercrime forums on Telegram, which are basically little do-it-yourself kits, ways for really rolling out a scam website.
So this once again is cybercrime industrialized where there are criminals who've given you the tools to piece together your scam and all the things that you need in order to con someone out of money.
And there are many Telegram channels where scammers are advertising these sort of services.
The scammers can vary from being script kiddies, probably many of them are script kiddies, but they're also sort of more organized criminals as well based around the world.
Now, earlier on, I was talking about companies which maybe were giving poor advice regarding security, telling you to turn off your security.
Scott Shapiro is a senior director of product management at Coinbase, and he recently tweeted that people shouldn't use VPNs and ad blockers as Coinbase treats them with suspicion.
So his tweet said, "Public service announcement, don't use a VPN to access Coinbase.
Attackers always use VPNs, so our risk models take that as a negative sign, even if you're legitimately using your own account.
Same with ad blockers and other extensions." Well, yeah, hackers use VPNs in order to keep themselves safe and secure online, right?
They don't want their identity falling out there. They don't want to be tracked too much.
But it seems to me it is crazy that Coinbase is actually telling people turn off things which normally we would suggest can offer an additional level of security, blocking malware with ad blockers and various extensions, maybe using a VPN as well, especially if you've got $850,000 worth of cryptocurrency in an online exchange.
You know, lots of people use VPNs, for example, or used to, I don't know if it still works, but you know, used to use VPNs to watch streaming channels they weren't allowed to watch in certain regions and that sort of thing.
There's perhaps less requirement for a VPN amongst the general population than there used to be, because so many sites now do have set up an encrypted tunnel with your browser via HTTPS.
So I'm always dubious about some of these VPN companies who really oversell the security features of those systems, but—
And I think it's a real mistake for a company to say, because bad guys use this stuff, don't you ever use this stuff, because I think that does send a dangerous message.
It's just don't use VPNs, otherwise we won't be able to identify you properly.
Who knows what other signals Coinbase is looking for, for suspicious activity.
It was basically digital cash was the idea. And that was a big draw at the beginning was governments did not control this. There was strong privacy and anonymity in the whole thing.
It was cash that you could use online.
And then what happened after that was a bunch of people got involved that were thinking, well, this could be a huge — we can make money off of this.
So from the very beginning of the Bitcoin era of crypto, you've had this schism between the idealists, if you like, about crypto who see this as a radical reinvention of society, et cetera, and the let's make tons of money out of this kind of people.
And what's interesting with this Coinbase thing is that the things they're pushing back on, things VPNs and ad blockers, these are privacy technologies.
And so the very heart of cryptocurrency being a privacy-enhancing technology, Coinbase are saying, no, we're on the money side and you don't get the privacy enhancing technology stuff.
I find that fascinating.
The other observation I would make is frankly, if you've got £850,000 or dollars worth of funds anywhere, you need to be paying somebody to look after that security of that.
Now, if it's in a bank, the bank hires a security person to look after it.
If you are giving it to Coinbase, Coinbase are not hiring a security person to look after your £850,000 and they're certainly not in this case, hiring them to do enough of a good job for you.
It's worth taking a chunk of that lovely stash of money you've got and paying somebody to make sure that it's secured and vetting your processes.
So basically it provides the kind of software that logs grades and attendance and all that kind of thing.
According to TechCrunch, 18,000 schools it's in and supports 60 million students in North America. Software was hacked.
This went back to, I think it was December last year, they first announced it. And we're still finding out the details about this.
The reason this story caught my eye was, and it's a really facile reason, but do you remember that scene in WarGames, that classic computer hacking movie, where Matthew Broderick's character hacks into a school database and changes his grades?
And the idea that you can hack in and change your grades to an A, I just — it took me right back to WarGames.
And there's this classic scene in it where Matthew Broderick's character is logging into the school software to change his grade.
I mean, there's a number of things about the film that are quite unrealistic.
One is that there's a really attractive girl in school who's attracted to him, even though he's a computer geek. And he tries to change her grades as well.
And then she refuses and says, no, no, you shouldn't change my grades. And then when she leaves, he changes her grade anyway to an A.
PowerSchool gets hacked and the hackers break into some portal which allows them access to a lot of the data that PowerSchool holds, which obviously is kids' data. So that's bad.
So we know that they said, well, this was potentially sensitive information.
So this was students' grades, their attendance and demographics, also Social Security numbers and medical data.
But even so, I mean, these days, mental health, does that include mental health data? Because that could be in there.
PowerSchool are doing this interesting thing of saying, "Yes, we've got a handle on this.
We know what's been affected." And then when journalists are asking, "Well, how many schools were affected?" PowerSchool say, "Well, we don't know." It's either column A or column B there.
Again, you get little tidbits of information come out.
Toronto School District Board, which is a school board in Canada, reckons the hackers may have accessed 40 years' worth of student data.
May have access to 40 years' worth of— What that probably means is that PowerSchool systems have access to something 40 years' worth of data going back, but did the hackers access that or not?
But what's really been interesting is apparently the teachers who use this stuff, the school, I should say school administrators, it would be teachers, but also people who work in schools, run the IT systems, have been trying to get together and work out what the hell's happened.
The problem with this, and I do sympathize with PowerSchool, is each school sort of has its own implementation of this. They log their own types of data.
So when people say, well, what data's gone? PowerSchool sort of said, well, it kind of depends what the school was storing on our systems, which is sort of up to them.
So I do have a certain amount of sympathy.
What's interesting is the school administrators themselves have started to weigh into this and actually take matters into their own hands and have started sharing on one of their forums, one of these bulletin boards, information saying, well, I looked up this and I found that and the hacker's IP address is this.
If you search for that, you might be able to find— they got it.
So they're actually doing a sort of crowdsourced incident response to this thing, which just shows you in the kind of fog of war with a lack of information from PowerSchool, it seems the actual users themselves are coming together and trying to sort out what's happened.
It's been a really interesting sort of thing to watch in terms of the incident response.
But if they're not coming back, what do you do?
What's interesting about this again though, is in the past when the hackers have attacked systems like this, sometimes they've gone to the provider, in this case PowerSchool, but the other option is to go, of course, to the 18,000 schools and try and get 18,000 ransoms out of them.
The TechCrunch article then goes on to say, this all but confirms that PowerSchool paid a ransom to the attackers that breached its systems.
The company refused to say how much it paid or how much the hacker demanded. Now, I think that's a bit of a leap.
Just because you've got somebody doing negotiation doesn't mean you've paid or certainly paid yet.
So I'm looking at a lot of ransomware groups' websites where if they want to threaten the victim, they post details of the victim and say, we've hacked this company or this organization, you know, here's what we've got and we'll leak it unless they pay.
I haven't seen this PowerSchool leak on any of the sites I've been checking. I've got access to them all, but I've not seen it on there.
And the suspicion always is, well, if your information's not on the site, you're probably negotiating and probably paying up.
So I don't know whether that roundup of ransomware websites I'm looking at indicates that maybe PowerSchool have paid and therefore aren't being identified on the sites.
It's interesting. It's proper fog of war, this one.
Like, do they have to inform the FBI, who maybe want to gather information on different cybercriminal groups?
But PowerSchool is a private company, and I'm pretty sure in the US, as in the UK, it's still not the case that you have to report. UK's looking at this.
UK government, obviously, big consultation. What do we do about ransomware?
The people I've spoken to say, no, it's a bit different to that, that it'll be a duty to inform government if you want to pay, which obviously means, you know, you have to go and tell teacher if you're going to do this.
So the effect might be the same, that people don't want to pay 'cause they don't want to tell the government that they're gonna pay, but.
However, off the back of this, can I also have a quick rant about ransomware operators? Please.
But anyway, as part of this story I'm doing about ransomware, I am contacting a whole bunch of these ransomware operators, of these dudes.
And I've got to say, it is like pulling teeth.
It is the hardest interviewing job I've ever done because, A, they're computer geeks, and obviously computer geeks don't tend to, you know, be very verbose and chatty.
And B, I think a lot of them are Russian, who, from my dealings with Russians, are some of the most taciturn people on the planet.
Trying to get more than two words out of these people is agonizing. Like you ask them like, oh, you know, what do you think of the LockBit takedown last year? No, it's no problem.
Okay, yeah, why'd you get into ransomware? Oh, it's just the money.
And I was like, this is good, I can use some of these quotes, this is, you know, he is actually a ransomware operator, he's an affiliate, you know.
And then I looked back at the interview and there was something really strange about his answers. Oh no.
He didn't spell I with a capital I when he was saying I am and that kind of thing, no full stops.
And then the longer answers, the ones that I thought, oh, that's quite juicy, they were the kind of answers that you get from ChatGPT.
And I was like, oh no, the one interviewee I got who could string a sentence together is actually just using ChatGPT. Bloody hell, it's impossible.
I just want someone who talks sense. Oh my God.
Something like a third of 8th graders in the US have below basic reading levels.
And if this can't be solved, my topic for today might be the answer, which is QR codes, because you don't need to read a thing. So QR codes. Okay, what does it stand for?
Any of you know QR?
And so these QR codes basically are, you know, we all know they're black squares on a white background and they have reference markers inside that are readable by most smartphones, computers, wearables, that sort of thing.
And then the data is extracted magically from these patterns and then brings you to whatever, a service, a product.
What I'm intrigued by is some QR codes are really blocky and they've got, I don't know, 16 square bits on them and others, they're really, really tiny little blocks and loads and loads of them.
And yet they all scan. That's what I wonder is how does the phone turn the QR code into effectively a URL?
I'm not going to tell you on the show, but you can go read it in my show notes because I do have it in there and it uses some kind of technology, which I can't remember the name of right now, but yes, you can go read about it.
So, you know, go do your homework. I won't do it for you. QR codes have been poodling along for what, a few decades now? And suddenly they became pretty ubiquitous.
We saw tremendous growth in the use of them a few years ago. Why did we see that?
And so it was a perfect storm that QR codes were there and it just proliferated during that time. And the other thing is that they're easy peasy lemon squeezy.
Even the youngest users would typically be able to figure out what to do with a QR code in a minute or two, right? It doesn't take a lot of technical nous.
Because you think it's really good for the user, right? It makes it easy for me to go to a parking place and then just scan this code and then off I go to where I need to go.
But it's used in all manner of things, from sharing simple business card details to touchless payments, Wi-Fi event check-ins, ordering online.
And the reason people use them is they're cheap. Incorporating QR codes is straightforward, budget-friendly, and there's even free tools to help you create them.
The media is rife with reports about motorists being scammed at car parks across the UK, with councils battling fraudulent QR codes stuck on machines.
However, the link takes you to a fake website. So you're actually paying the fraudster, not the council, meaning that they'll probably fine you.
So an unexpected package from an unknown sender arrives in your name at your house. So you open it and you find a note that says it's a gift. But it doesn't say who sent it.
And the note also says, scan the QR code to find out who sent it.
You're wondering who the bloody hell— It must be Geoff White, you're thinking, who sent me this.
And rather unusually, it targeted targets WhatsApp and uses QR codes. So as with a typical phishing attack by Star Blizzard, you guys know about Star Blizzard?
They're some gang that go around.
In this campaign, the threat actor personates a government official, right? So that's what they used in this particular campaign.
Email sent to the target contains a QR code, quote, purporting to direct users to join a WhatsApp group on, quote, the latest non-governmental initiatives aimed at supporting Ukraine NGOs.
Have they thought this through properly?
So this code, this QR code, okay, in this email is intentionally broken and will not direct the user to any valid domain.
And this is an effort by Star Blizzard apparently to target the recipient into responding.
But it's actually used by WhatsApp to connect an account to a linked device or a WhatsApp web portal.
Because remember, we recently discussed the Voluntary Cyber Trustmark that the US are doing to better help secure consumer-grade internet devices like smart speakers and home security cameras and baby monitors.
Well, the White House said that retailers, including Best Buy and Amazon, will be soon highlighting products that carry this US Cyber Trustmark.
And all you need to do is scan the QR code on the device for details about the cybersecurity of the product, such as the support of the product and security updates and all that stuff.
Like, is that irony? Is that irony? Is that the definition of irony?
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Go to 1password.com/smashing, and thanks to 1Password for supporting the show. And welcome back.
And you join us at our favorite part of the show, the part of the show that we like to call Pick of the Week.
Could be a funny story, a book that they've read, a TV show, a movie, a record, a podcast, a website, or an app. Whatever they wish.
It doesn't have to be security-related necessarily.
Art for my lovely wife.
So I made a little mental note and thought, oh, I will get that for her one day.
So this particular piece of art is by an artist called Niall Conlon, who was brought up in Belfast and is in response to a sign which used to appear in some London boarding houses.
Back in the 1950s, which used to say, "No Irish, no blacks, and no dogs," which they'd put up in the window because they didn't want people staying there.
Now, I don't know if you've noticed lately, but there's been some people who've been a bit anti-diversity lately and maybe have been picking on minorities or maybe just dogs, who knows?
But as a result, I thought maybe I should choose this particular piece of art because Niall Conlon has done this piece of art, which is all about more Irish, more blacks, more dogs.
And so I bought it for my lovely wife. It's a vibrant piece of art. It's a bit graffiti-esque, I suppose. Promoting inclusivity, empathy, and diversity.
You can go and check out other art by Niall Conlon if you wish to. He's even doing t-shirts and mugs and all sorts these days as well. But that is my pick of the week.
This is also a documentary version of the book, which I think is called Skandal with a K, which is on Netflix. Yes, I do. I have mixed feelings about this book. And it confused me.
It confused me, did this one. Because on the one hand, it's very compellingly written. It's about a company called Wirecard, which was a German company.
Yes, Wirecard, very famous case of a company that managed to achieve, I think it was an $18 billion valuation. At one point they were going to buy Deutsche Bank.
They thought they could buy out Deutsche Bank. And it turned out the company was basically worthless. It was a giant fraud. So you're kind of seeing, you want to see where it goes.
You want to see what happens to the guy.
I thought some of the concepts— if you're a financial journalist and you understand things, fine, but I'm not. I'm a journalist mainly concentrating on technology.
I'm not thick, but sometimes it sort of left me behind a little bit.
He actually from very early on understood this company was a basket case, but then had to go through hell and high water to sort of prove that.
There is an interesting thing about how journalists work with or don't work with financial speculators who sometimes have a vested interest in a story being either true or not true.
So there's a whole subtext around that, which is all covered a bit in the book. But I don't know, I would be interested what other people think.
I will recommend it simply because I say it's a good read, but I'd be interested to know whether other readers like me were left a bit baffled by some of the content.
And there's other stories like Bad Blood and Billion Dollar Whale, which are great books and great stories, you know, that are about an industry but get through to the general public.
Money Men, I think, was pitched that way, and it is good enough to— definitely the story is good enough.
Every now and again, you just need a paragraph just put in layman's terms as to what's going on here, like a reprise paragraph.
And I do wonder, I do wonder in future whether, and this is a kind of slightly out there thing in terms of publishing, increasingly obviously I think people are going to read on e-readers.
And digital books and audiobooks. It is possible, potentially, as an author to do two slightly different versions of the book. One for fast lane readers and another for sort of—
How this would work, I don't know. I think it's a huge ask, and also writing a book's traumatic enough as it is, as I well know.
In December, you're crammed into houses with relatives you only see once a year, and the tension is absolutely overwhelming. January is fantastic. You don't have very much to do.
It's relaxing. You know, you're just a slow start to the year.
And you're sitting there after Christmas going, wow, my savings account is empty.
And then you have to scoop this super hot sugary marmalade into hot clean jars without burning yourself. That's super fun.
It's yum, yum, yum, yum, yum.
I'm sure lots of our listeners would love to find out what you're up to and follow you online. What's the best way for folks to do that?
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Hosts:
Graham Cluley:
Carole Theriault:
Guest:
Geoff White
Episode links:
- ZachXBT’s thread – Twitter.
- Coinbase employee tells users not to use a VPN or ad blocker – Twitter.
- What PowerSchool won’t say about its data breach affecting millions of students – TechCrunch.
- QR code – Wikipedia.
- Reed–Solomon error correction – Wikipedia.
- Urgent warning over QR code scam tricking drivers out of £100s at popular car parks – Express.
- Scam alert: QR code on an unexpected package – Consumer Advice
- New Star Blizzard spear-phishing campaign targets WhatsApp accounts – Microsoft Security Blog.
- What You Must Know Before Scanning a QR Code – AARP.
- “More” – Niall Conlon.
- “Money Men” by Dan McCrum – Penguin Books.
- Bitter Orange Marmalade Recipe – Ballymaloe Cooking School.
- Smashing Security merchandise (t-shirts, mugs, stickers and stuff)
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Theme tune: “Vinyl Memories” by Mikael Manvelyan.
Assorted sound effects: AudioBlocks.

