Hacker Remix

SEC charges four companies with misleading cyber disclosures

80 points by impish9208 13 hours ago | 32 comments

hn_throwaway_99 12 hours ago

It's amusing to me how the economic and cultural incentives at so many companies is to lie as much as possible when it comes to breach disclosures while pretending that you're still technically telling the truth.

I think that in all of these cases it would have been no worse for the companies in question if they just sent out a dry, "just the facts, ma'am" report of what actually happened, without any of the BS "the security of our customer data is our primary priority!" statements to begin with that always accompany these kinds of breach disclosures. E.g. something like:

On <date>, due to a vulnerability in the third party vendor SolarWinds which provides network security services for us, we detected the following breaches of customer data:

1. xxx

2. yyy

The steps we are currently taking, and what you should do: zzz.

----

Perhaps one good thing that can come out of this is that some sort of "standard" format for breach disclosures comes about (think the "Nutrition Facts" labels on food boxes in the US). All I do when I see companies trying to minimize breach disclosures is assume they're bullshitting anyway.

kmeisthax 10 hours ago

If companies were mere profit-seeking entities, these breach notices would be minimally disruptive to the business. Most people do not immediately jump ship just because a breach happened.

But most companies are not just that. They're barely-legal Ponzi schemes. The board and their appointed CxOs are selected specifically on the basis of how much they can get the stock price up. This results in companies making lots of terribly short-sighted decisions.

In the specific case of breach disclosures, any bad news about a company tends to create uncertainty, which makes short-term investors and speculators close their positions, which drops the price. This drop tends to be short-term, but it imperils the liquidity of the investment, and liquid investments tend to be more valuable, so...

gruez 3 hours ago

>But most companies are not just that. They're barely-legal Ponzi schemes. The board and their appointed CxOs are selected specifically on the basis of how much they can get the stock price up. This results in companies making lots of terribly short-sighted decisions.

"Most companies are ponzi schemes focused on short term stock price appreciation" is a criticism that has been around for decades. If that's really the case, the performance of the s&p 500 shows that it's either false, or a really long con that somehow still hasn't collapsed yet.

A far more straightforward explanation is that CEOs don't like delivering bad news, especially ones that happened on their watch, so they try to bury it. Covering up mistakes is something that kids even do. There's no need to invoke "most companies are [...] barely-legal Ponzi schemes"

TeMPOraL 8 hours ago

Thanks, that does explain the long-standing conundrum I had. Having worked for a cybersec/GRC startup in the past[0], I got a good look at how risks and their impacts are categorized, but I still couldn't figure out, why does anyone care.

Like, "reputational damage", obviously nobody cares if a company gets breached - 99% of the customers won't notice, 99% of the remaining won't understand it, and the competitors are probably just as much at risk; all you need to do is issue some PR note and maybe offer free credit monitoring (some US peculiarity), and you're done. Same for most other things leading to "reputational damage". It feels like it's obviously a loss of $nothing, so why do CFOs and CISOs seem to put so much interest in this impact category?

Well, I haven't thought about stock prices, and their lack of correlation with customer experience. My bad.

[0] - I suppose I had all the things I needed to figure it out, somehow I didn't connect the dots. And/or was too busy trying to ensure our fancy probability math wasn't bullshit to pay attention to the larger context.

JumpCrisscross 9 hours ago

> in all of these cases it would have been no worse for the companies in question if they just sent out a dry, "just the facts, ma'am" report of what actually happened

This assumes there is someone on staff capable of writing a no-nonsense diagnosis.

TeMPOraL 8 hours ago

Sure there are. The person writing the release gets fed some internal bullet points or summaries as source material; that material is strictly less bullshit than the resulting official press release.

SpicyLemonZest 9 hours ago

I'm sympathetic, but I feel like the order against Mimecast illustrates a big part of the problem here. This seems to me like a pretty detailed disclosure:

> The investigation revealed that the threat actor accessed and downloaded a limited number of our source code repositories, as the threat actor is reported to have done with other victims of the SolarWinds Orion supply chain attack. We believe that the source code downloaded by the threat actor was incomplete and would be insufficient to build and run any aspect of the Mimecast service. We found no evidence that the threat actor made any modifications to our source code nor do we believe that there was any impact on our products. We will continue to analyze and monitor our source code to protect against potential misuse.

But the SEC feels this was misleading, because they did not specify which source code repositories were targeted or what percentage of the code in those repositories was exfiltrated. That's the dynamic that drives these kind of disclosures, oversharing driving demands for even more absurd levels of oversharing. They had to go calculate that precisely 76% of their M365 interop code was exfiltrated - is that information worth the cost of producing it, or even valuable to anyone in any way?

notatoad 7 hours ago

>is that information worth the cost of producing it, or even valuable to anyone in any way?

It's valuable to the SEC, because they're the ones tasked with enforcing these rules and specifics are what allow for enforcement. If you publish an actual percentage, then they can ding you for lying if the percentage was wrong. being vague isn't misleading on its own, but it can be used to be misleading.

if they actually know what was exfiltrated, then putting specifics in the disclosure should be a trivial matter. maybe not a percentage of lines in the codebase, but you've got to give the SEC enough that they could potentially check it and determine if it was a lie. and "a limited number" isn't specific enough to do that.

SpicyLemonZest 6 hours ago

I don't agree that the Securities and Exchange Commission is tasked with enforcing good cybersecurity disclosures. You'll note that this settlement formally has to do with the companies' statements to investors, although I agree with the implicit assumption a lot of people upthread are making, that the charges would not have been filed if customer disclosures were adequate.

Veserv 7 hours ago

You do not need to say precisely 76%. Nobody is going to complain if you spend less resources to get a less strict upper bound like 80%. Hell, you can make it easy for yourself and just say 100%; costs nothing and guaranteed to not understate the customer impact. The problem is deceptively implying less customer impact.

But no company will deliberately overstate the customer impact, think of what it would do to their bottom lines. They much prefer spending a bunch of money to minimize overstating. Exactly.

If only they were allowed to understate customer impact then they could harvest even more of that reputational arbitrage is not a very compelling justification.

MattSteelblade 11 hours ago

> Unisys will pay a $4 million civil penalty;

> Avaya. will pay a $1 million civil penalty;

> Check Point will pay a $995,000 civil penalty; and

> Mimecast will pay a $990,000 civil penalty.

With the exception of Mimecast, these are companies that are bringing in billions of dollars in revenue annually. How is this supposed to deter them?

Hilift 9 hours ago

The fines are symbolic. Even if you look at the fine for the hotel data breach in 2018, that was only $52 million (US) and $23 million (UK), total of $75 million. And the Equifax breach? An executive VP of IT sold $584k of shares right after the breach and before the press release. Nothing happened to him, he said he was unaware of the breach. https://www.npr.org/sections/thetwo-way/2017/09/08/549434187...

The SW supply chain attack is one of the most brilliant cyber attacks in recent history. They hit a train load of gold bars, and had a much as 14 months of dwell time with potentially 18,000 customers. Discovery must have been disappointing for the attackers.

If you follow the most important rule, secrecy, you get plausible deniability and small-er fines.

ensignavenger 11 hours ago

Unisys and Avaya are both reporting losses. This fine makes it even more of a loss. Further, if they don't mend their ways, the SEC will give them an even bigger fine.

0xffff2 11 hours ago

They pay the penalty and they are expected fix the issue. If they don't, there will be additional enforcement actions.

Mistletoe 11 hours ago

Doing anything at all probably costs more than $1M.

alephnerd 10 hours ago

Not that much more.

Furthermore, security vendors like Avaya and Unisys could arguably be in breach of contract with customers because it could be argued that they misrepresented their internal security protocols to customers.

advisedwang 9 hours ago

SEC likely offered low settlements here to get agreements without having to battle in court whether SEC even has the authority to do this. Now that they have to some degree established authority here* they can go for enforcement harder and push companies further on disclosure.

* ie a practical precedent, not a legal one

mise_en_place 10 hours ago

Probably not the case here, but the issue is with how some of the NIST standards around cybersecurity are certified. API endpoints are manually tested and then screenshots are provided. Completely manual and very inefficient and prone to human error. This is an issue of US national security, we need more skilled hackers in this space.

librasteve 11 hours ago

I feel that it is time to criminalise corporate fraud - ie executives presiding over businesses or state organizations that lie, deliberately obscure or suppress any relevant facts should expect jail time. This ought to be at similar levels of time and standards of “should know” as health and safety law.

Several recent examples would have fallen foul of this … Grenfell tower, Tesla FSD, Boeing 737max, Thames Water, United Utilities and the EA.

Etheryte 10 hours ago

I agree, we already see this in the financial industry, if you don't do your part to prevent money laundering, you can be facing real jail time. It's long overdue that similar liability came to other industries, the examples you brought up show it's clearly necessary. The free market and its financial incentives alone are not cutting it.

tonetegeatinst 5 hours ago

Wouldn't corporate fraud be opening them to a lawsuit? Say your a hedge fund that decided to invest and buy 23% of availabile market shares, the fraud of misrepresenting the company's situation leaves investors with no way to trust a market, and basically your stuck relianing on the financial reports alone.