AI-driven hackers hit thousands of companies through software supply chain

Microsoft has confirmed that a large-scale cyber intrusion exploited AI-powered agents to sweep through thousands of corporate networks, marking a significant shift in how supply chain attacks are executed. The operation, attributed to a China-state-aligned group known as Storm-0940, leveraged an open-source framework to automate the process of infiltrating businesses that rely on ConnectWise for cloud management and backup services.

The attack began with unauthorized access to ConnectWise, a multi-tenant application used by various enterprises. Once inside, the group utilized stolen credentials from ConnectWise applications to sign in to over 2,250 Microsoft 365 tenants. Because these logins used application credentials rather than individual user accounts, they bypassed standard interactive sign-in checks, allowing the attackers to move quickly through the systems.

The speed of the intrusion was notable. In some cases, the attackers gained privileged access to tenant directories within three hours of initial targeting. This rapid escalation was driven by ARTEX, a framework that employs large language model-driven agents to conduct autonomous penetration tests. These agents performed scanning, reconnaissance, and password spraying with minimal human intervention, operating at a pace that left defenders with limited time to detect the activity.

The group also engaged in extensive password spraying, targeting 327 accounts across eight organizations. This campaign resulted in more than 151,000 failed login attempts, with no successful breaches recorded through this specific method. At its peak on October 11, the system generated 2,900 attempts per minute, with 48 accounts logging over 1,000 failures each. Nearly 98% of these attempts were automatically locked out by security systems.

However, the use of compromised ConnectWise application credentials allowed the AI agents to sign in from specific IP ranges. In one instance, the group executed more than 200 sign-ins in under four minutes using just four application credentials. Once inside, the attackers performed directory operations, changed app credentials, and modified privileged roles. Huntress, a security firm, observed one tenant where an app assigned itself the top administrator role on October 15, a behavior that triggered specific security alerts.

By October 16, Huntress confirmed unauthorized sign-ins for 162 tenants. The following day, almost 1,000 Entra tenants showed sign-in activity from the attacking IP, with more than 300 of those logins succeeding. The sequence of the attack, which moved through tenants in sorted order with seconds between attempts, suggested the use of a script operating from a predefined target list.

The targets included 14 industries, with a heavy concentration in aerospace and defense, semiconductors, government, and think tanks. Microsoft clarified that the attack did not stem from a vulnerability in its own systems but from the compromise of the third-party ConnectWise platform. The use of ARTEX is not unique to this group; other actors in different regions are adopting the technology, including a suspected Chinese group linked to recent breaches at South Korean financial institutions.

In response, ConnectWise suspended its Cloud Backup, SaaS Security, and Cloud Management services as a precaution. The company has begun a phased restoration process, expecting recovery to take several days, and currently sees no indicators that partner backup data was compromised. The developer of ARTEX has announced the project will no longer be updated and will become closed source. Microsoft advises customers to keep affected app connections disabled until formal restoration instructions are issued and to review activity logs from this month where possible.