Sonic Investigates Breach, 5 Million Cards For Sale on Cybercriminal Market

The fast-food chain Sonic said yesterday that it is investigating a possible payment card breach at its stores, and security blogger Brian Krebs reported that the incident may be tied to a batch of five million fresh payment cards being offered for sale on the stolen credit card shop known as Joker’s Stash.

Sonic said its payment card processor informed the company last week of unusual activity regarding cards used at its stores. Krebs reported that two sources purchased a handful of payment cards from the batch of five million credit and debit cards listed on Joker’s Stash, and those sources said the stolen cards had all been recently used at Sonic locations.

A Sonic spokesperson said that the breach investigation is still in its early stages and it is unclear how many of the company’s nearly 3,600 locations may have been impacted.

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Cybercriminal markets like Joker’s Stash often allow the filtering of stolen payment cards based on various options such as location, which allows malicious actors to target affluent areas or to buy cards located near them so that fraudulent transactions are harder to detect.

“It remains unclear whether Sonic is the only company whose customers’ cards are being sold in this particular batch of five million cards at Joker’s Stash,” Krebs wrote. “There are some (as yet unconfirmed) indications that perhaps Sonic customer cards are being mixed in with those stolen from other eatery brands that may be compromised by the same attackers.”

Fast food chains have been at the center of some of the most impactful and widely discussed payment card breaches over the past several years. In July 2016, Wendy’s announced that more than 1,000 stores were affected by point-of-sale malware, leading the fast-food chain to become the top trending company tied to a payment card breach last year. Likewise, Arby’s point-of-sale breach is the top trending consumer goods payment card breach of 2017, and other major restaurant chains such as Chipotle and Shoney’s have announced similar breaches this year.

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Arby’s is the top trending consumer good target associated with payment card cybercrime so far this year, although it remains to be see how impactful the Sonic breach will be.

An interesting breach announcement trend in 2017 is the attempt to obfuscate the total number of breached locations behind clunky websites that divide the affected locations into searches not just by state, but by city. Case in point, the breach lookup webpage provided by Arby’s, which mimics the cumbersome and now-defunct webpage set up by InterContinental Hotels Group (IHG) for its recent breach. The IHG website divided the affected locations across hundreds of individual cities, and that tool, along with the news that IHG would update the list as more hotels confirmed breaches, meant frequent travelers had to comb through numerous searches repeatedly in order to find out if they were impacted by a single breach.

The Wendy’s breach, which affected franchise locations serviced by a third-party payment provider, was particularly painful for financial institutions as some locations were re-compromised after initially clearing the malware — leading to customer payment cards having to be re-issued multiple times. The Arby’s breach, by contrast, was caused by malware placed on systems inside corporate stores rather than franchise locations.

It’s unclear at this point which Sonic stores were affected, but the a 2016 report to stockholders said that 3,212 of the company’s 3,557 locations are franchised. The company also announced in 2014 that it was rolling out a new point-of-sale system and proprietary point-of-personalized service technology based on a Micros Oracle platform. In April 2017 it was reported that the update had made its way to 77 percent of Shoney’s locations.

Cyber-Insurance, Threat Intelligence and the Wendy’s Breach: Interview with Larry Bowman

Data breaches and other cyber threats have plagued business over the past decade often resulting in a long and expensive recovery process. Luckily for businesses, cyber-insurance can help alleviate some of the financial burden of these cyber-attacks.

“If you were to Google top ten losses due to data breaches in 2015 you would start off with a low of about $46 million for the Home Depot, move into the hundreds of millions with Anthem and Target, and as you get closer to Epsilon you get into the hundred to a billion mark,” said  Larry Bowman, Director at Kane Russell Coleman and Logan PC. “The Veteran’s Administration hack was valued at about $500 million.  These totals are for notification costs, response, cleaning up the computer system, implementing changes to increase encryption and security protection in the system. But, this does not take into account the loss of business and revenue.”

We had a chance to speak with Bowman about cyber-insurance: what is it, what it covers, and how threat intelligence fits into the equation. Bowman also provides some insight on the current Wendy’s point-of-sale data breach. Our conversation follows.

To kick things off, can you explain what cyber-insurance is and what exactly it covers?

To explain cyber-insurance, it’s helpful to first start with a brief explanationLarry Bowman of traditional insurance and then explain the difference between it and cyber-insurance. Traditionally, insurance is for tangible property – such as if you own a home, business, or rent space. You insure property against the risk of loss, and that property is typically tangible property. So, you’ll see language in first-party property insurance – which is insurance industry lingo for like your homeowner’s policy – that is set up to protect you from that. The core insuring agreement – in exchange for premium money – insures the risk of loss which is usually defined in terms as direct physical loss to tangible property.

Secondly, there is a form of insurance called liability insurance. The industry acronym for it is CGL – commercial general liability insurance. And once again, if you act negligently – you being the insured – and you cause damage to some third party’s tangible property, your liability insurance will indemnify you for your legal obligation, which will then indemnify the people you hurt for the damage that you caused to their property.

Along comes hacking and cybercrime and data breaches. The people who are victimized by these third-party attacks make claims to their property insurance coverage. In most instances, whether it is a claim submitted under a traditional property or liability insurance policy , the courts look at these policies’ language  and say there is no coverage because there is no loss to direct tangible property. This doesn’t exist in the virtual world of data and data breaches. There have been some cases where damage has been done to a computer system that looks like it is physical damage. Stuxnet is a great example of how a computer program can damage tangible property. In those cases, traditional policies may cover an insured’s losses.  The bottom line is though, with the outlying cases aside, most cases say for there to be property or liability insurance coverage you have to have physical damage to tangible property, and that doesn’t exist when the insured has lost electronic data.

The losses from companies who suffer a data breach and the lack of insurance from the traditional market created  a market for cyber-insurance. What has happened over the last few years has been the development of specialty insurance products designed to insure against the losses companies face when their computer systems or data is breached or hacked. These policies operate like traditional property or liability policies. But, there is no longer a requirement to have direct physical loss to tangible property. Cyber-insurance policies cover things like the cost of notifications to people affected by a data breach, the cost of hiring security professionals and lawyers to deal with the situation, and the cost of government compliance. It may or may not cover lost revenues or profits. Of course, the scope of coverage is specific to the policy itself.

What are some of the problems with the cyber-insurance industry?

There are a couple problems the insurance industry currently faces. First, the industry only has about  a decade of experience in covering cyber losses – which isn’t a lot of time in the historical knowledge-base of the insurance industry – that makes pricing policies difficult. However, that is a problem in the process of being solved because the quantifiers are coming up with increasingly better models and formulas to allow an insurance company to set up a policy and price it accordingly. The insurance companies like certainty; they like probability. As time goes by and as data improves, this will be easier and easier to do – within reason.

The second problem is the lack of a consensus standard of care for data protection; although there are numerous proposed standards and guidelines for data protection – such as NIST’s cybersecurity framework.   What I am talking about here is that it is nice to know what the rules are. The SEC, FDIC, and FTC have all pronounced in the last couple of years that they think cybersecurity is a board of directors-level issue that requires hands-on knowledge and attention and an effective remedy at the board of high management level. When you fill in the blanks, there are conflicting messages about what a board should do to enable reasonable cyber protections.

At SurfWatch Labs, we believe that robust security features such as firewalls and antivirus software are paramount to a well-rounded cybersecurity strategy. Perhaps just as important, we believe cyber threat intelligence – knowing what threats are out there and knowing how to proceed with security – is just as important. Some of the problems you mentioned with cyber-insurance is a lack of understanding around reasonable cyber protections. Do you believe cyber threat intelligence is a logical step in solving that issue?

As part of the initial application for cyber-insurance a lot of insurance companies will require the company applying for insurance to fill out a detailed form describing what its current cybersecurity policies are. I don’t know if those forms require cyber threat intelligence, but that would be a source of beneficial information. And it may be something that insurance companies should require from insurance applicants.

Are companies utilizing cyber-insurance to protect their assets in case of a data breach?

If you were to Google the amounts spent on cyber-insurance it started out small, but it really started to get off the ground with these well-publicized data breaches. In a few years, this is going to be a multi-billion dollar market. As a matter of fact, I believe it is already up to the billion-dollar mark already, and it is expected to get to about $5 billion by 2020. As the consensus standard gets better defined, using due diligence to protect your company’s assets and customer’s assets is certainly going to be a part of liability cyber-insurance coverage.

I would love to get your take on the current events tied to the Wendy’s data breach. It seems like the number of restaurants affected by point-of-sale malware increases every week.

The loss to Wendy’s is similar to the Target loss. The bad guys have gotten control of point-of-sale information, which means they have people’s credit card information. So what is the exposure to Wendy’s? Wendy’s gets sued by multiple customers who are saying they failed to implement reasonable measures and allowed our payment card information to be obtained by these hackers.

Now, their insurance policy will define what out-of-pocket costs are covered. That’s part of the fun right now is defining what those costs are. Some of those costs are driven by state and federal laws – like notification. If you are a retail company in possession of thousands of credit cards and those cards are obtained by a third-party, you have to notify all of those people about the event.

It’s not just notification costs; it’s everything that is done to investigate the data breach. They might have to pay experts, lawyers, and pay for forensic measures to make sure a breach doesn’t happen again.  There may be costs with complying with regulatory action or government investigations.  Those are just some of the out-of-pocket costs from the breach. Who knows, maybe people won’t trust Wendy’s anymore with their credit card information and consumers may simply avoid the restaurant.