April 3, 2006 7:27 PM PDT
Payment processor fears credit card crooks
Several Web hosting companies that use the Authorize.Net service to accept credit cards online saw a sudden spike in transactions over the weekend. The transactions, most for $500 and $700, were billed to Visa, MasterCard and American Express cards that belong to people across the U.S., representatives for three Web hosts told CNET News.com.
"These hackers got their hands on high quality data, and they used merchants of ours to run that data through the merchant's Web site, which goes through our platform," said David Schwartz, a spokesman for Authorize.Net in American Fork, Utah. The company says more than 130,000 merchants use its online payment service.
The Web hosting companies discovered the unusual charges through e-mail alerts that Authorize.Net sends after each transaction. Close to 3,000 suspicious transactions were pushed through the merchant accounts of three companies with which CNET News.com spoke, and more likely happened at other Web hosts, these three companies said.
Unclear, however, is where the weakness in the transaction chain is, whether it was at the level of the payment processor or the Web hosts. Also unclear is where the culprits obtained the card information they used in the transaction attempts.
On Sunday morning, in about an hour-and-a-half time period, fraudsters ran close to 1,500 transactions through the Authorize.Net account of Defender Technologies Group, a Web host in Ashburn, Va., said Tom Kiblin, the company's CEO. "It was just under $1 million that got put through on our account," he said. Kiblin says he has reported the matter to the U.S. Secret Service.
Lance Conway, president of Viper Logic in Palm Springs, Calif., and Lisa Willman, billing manager at Vortech in Orlando, Fla., have similar stories. Viper's account was used on Friday to charge $700 to almost 800 cards, Conway said. At Vortech, that same amount was billed on Friday to about 400 cards, Willman said.
In all cases, the information that was put through the system included a card number, expiration date, name and address, representatives for the Web hosts said.
The episode is another example of credit card and debit card insecurity. Recently, a crime spree forced banks across the nation to replace hundreds of thousands of debit cards. Last year a cyber break-in at a payment processor exposed names, account numbers and verification codes for 40 million credit cards.
The three Web hosting companies have all voided the fraudulent transactions, which took up significant time, the company representatives said. Nevertheless, some consumers noticed that their banks had put holds on their credit cards or even charged their debit cards, and they called the Web hosting companies for clarification.
"We try to explain to them: 'No we're not thieves, we're not stealing your money, your credit card information was stolen,'" said Kiblin. His company, Defender Technologies, has fielded calls from about 100 cardholders, he added.
Conway at Viper Logic received about 30 calls over the weekend, and his phone was ringing often on Monday as well, he said. "What a nightmare. We're just a small company; there are only eight of us here."
Though the attackers already had control over a database of credit card numbers, Authorize.Net and the Web hosting companies are pointing fingers as to who is to blame for allowing the mass charges to the accounts. The Web hosts say there are no traces of transactions on their servers, so fraudsters must have accessed Authorize.Net directly.
But Authorize.Net denies any blame.
"Authorize.Net did not suffer from any sort of security breach whatsoever," Schwartz said. "If someone commits fraud in a physical store using a stolen credit card, the merchant would never hold the manufacturer of the card-swipe terminal accountable for that fraud. In the e-commerce world, a payment gateway is the equivalent."
The Web hosting companies may have left open a door to the payment processing service, possibly through their online shopping carts, Schwartz speculated.
Opinions also differ on why someone would want to send large amounts of money into the accounts of the Web hosts.
"It looks like somebody was fishing with a credit card list, trying to validate credit cards," said Kiblin. "The goal for these guys, if a card is valid, they go off and start buying stuff. All these guys that got hit are going to see other charges."
But for that to be true, the transaction amounts are too high, Schwartz said. "Usually, when hackers try to validate whether a card is good or not, they will do an authorization attempt for a dime. If it goes through, they know they have got a good card number, and when it is rejected it is going to reject whether it is a dime or $700," he said.
Avivah Litan, an analyst with Gartner, agreed. She suspects the culprits had figured out the Authorize.Net system. They may have intended the money to eventually be directed into a merchant's account outside Authorize.Net, where they could siphon it out later. But they were tripped up by the e-mail notifications Authorize.Net sends to its users.
"It was on a weekend; they always do this stuff on weekends, when no one is around watching these systems. If there were no e-mail alerts, the money would have gone into the merchant account and they would have redirected it into their account and no one would have known," Litan said. "They got caught with their pants down."
14 commentsJoin the conversation! Add your comment