Microsoft found malware that hijacks crypto wallets and spreads through USB sticks

• The malware dubbed a “crypto clipper,” has been spreading via infected USB drives to target Windows users’ crypto wallets since February, according to Microsoft.
• Once installed through a malicious .lnk shortcut file, the worm known as Trojan:Win32/CryptoBandits monitors the clipboard for seed phrases, private keys and recipient addresses, exfiltrates data over the Tor network, and can silently swap in attacker-controlled wallet addresses.
• The malware propagates by replacing documents on clean USB drives with identically named shortcuts
• Microsoft urged users to disable AutoRun, block .lnk execution on USB media, restrict script hosts and check networks against published indicators of compromise.

Malware that spreads via USB sticks has been infecting Windows personal computers and targeting crypto wallets since February, Microsoft said in a blog post.

The firm calls the malware a "crypto clipper", and its Defender Antivirus identifies it as Trojan:Win32/CryptoBandits.

The process starts with an infected USB drive containing a malicious shortcut, or link, file. In Windows, shortcut filenames end in ".lnk" and direct the operating system to open a specific program, folder or file stored elsewhere on your computer.

When a user plugs in that drive and clicks the shortcut, a type of malware known as a "worm" is installed onto the PC. Once installed, it does two things: it constantly runs the actual crypto wallet-stealing code and simultaneously waits for a new, clean USB to be plugged into that same PC.

The wallet-stealing component monitors Windows’ clipboard, the hidden temporary memory used for copy-and-paste operations, roughly every 500 milliseconds. When a user copies a crypto wallet seed phrase or a private key for a Bitcoin or Ethereum wallet, the malware captures that data and sends it to the attacker’s server over the Tor network, an open-source overlay that provides anonymous communication. It also takes five screenshots, ten seconds apart, and sends those along too.

The risk doesn't end there.

If a user copies a recipient address to send funds, the worm silently replaces it with an attacker-controlled address before the user pastes, so the transfer goes to the attacker without any visible cue.

Lastly, the worm propagates when a clean USB drive is plugged into the computer. It scans the clean USB drive for ordinary files, Word docs, Excel sheets and PDFs, replaces them with new shortcut files using the same names and infects the drive. Then the cycle continues.

Microsoft recommends disabling AutoRun for removable media, blocking .lnk file execution on USB drives via group policy and restricting script hosts such as wscript.exe and cscript.exe. Microsoft Defender customers can also run hunting queries to check for related activity, including connections to a local Tor proxy on port 9050.

Microsoft published a list of indicators of compromise, including file hashes and .onion domains used as command-and-control servers, for security teams to check their networks against.

Disclosure & Polices: CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. CoinDesk has adopted a set of principles aimed at ensuring the integrity, editorial independence and freedom from bias of its publications. CoinDesk is part of Bullish (NYSE:BLSH), an institutionally focused global digital asset platform that provides market infrastructure and information services. Bullish owns and invests in digital asset businesses and digital assets and CoinDesk employees, including journalists, may receive Bullish equity-based compensation.