QUADRIGA INITIATIVE
CRYPTO WATCHDOG & FRAUD RECOVERY PLATFORM
A COMMUNITY-BASED, NOT-FOR-PROFIT
$0 USD
MARCH 2018
GLOBAL
LEDGER
DESCRIPTION OF EVENTS
"Based in France, Ledger is the largest cryptocurrency hardware wallet company." "Ledger is a hardware cryptocurrency wallet that is used to store, manage, and sell cryptocurrency. The funds held in these wallets are secured using a 24-word recovery phrase and an optional secret passphrase that only the owner knows."
"Ledger offers two products, the Nano S and Nano X, that can store the digital keys used to secure crypto wallets. The devices can be used with a variety of cryptocurrencies, are compatible with numerous apps, and are supposed to offer a safe way to manage crypto without compromising too much on convenience. Ledger says on its website that it has sold 1.5 million products to customers in 165 countries to date."
"Hardware wallets like those sold by Ledger are designed to protect the user’s private keys from malicious software that might try to harvest those credentials from the user’s computer. The devices enable transactions via a connection to a USB port on the user’s computer, but they don’t reveal the private key to the PC."
"Yet Saleem Rashid, a 15-year-old security researcher from the United Kingdom, discovered a way to acquire the private keys from Ledger devices. Rashid’s method requires an attacker to have physical access to the device, and normally such hacks would be unremarkable because they fall under the #1 rule of security — namely, if an attacker has physical access to your device, then it is not your device anymore."
"Rashid discovered that a reseller of Ledger’s products could update the devices with malicious code that would lie in wait for a potential buyer to use it, and then siphon the private key and drain the user’s cryptocurrency account(s) when the user goes to use it."
"The crux of the problem is that Ledger’s devices contain a secure processor chip and a non-secure microcontroller chip. The latter is used for a variety of non-security related purposes, from handling the USB connections to displaying text on the Ledger’s digital display, but the two chips still pass information between each other. Rashid found that an attacker could compromise the insecure processor (the microcontroller) on Ledger devices to run malicious code without being detected."
"Ledger’s products do contain a mechanism for checking to ensure the code powering the devices has not been modified, but Rashid’s proof-of-concept code allows an attacker to force the device to sidestep those security checks."
“You’re essentially trusting a non-secure chip not to change what’s displayed on the screen or change what the buttons are saying,” Rashid said in an interview with KrebsOnSecurity. “You can install whatever you want on that non-secure chip, because the code running on there can lie to you.”
"White said Rashid’s code subverts the security of the Ledger’s process for generating a backup code for a user’s private key, which relies on a random number generator that can be made to produce non-random results."
“In this case [the attacker] can set it to whatever he wants,” White said. “The victim generates keys and backup codes, but in fact those codes have been predicted by the attacker in advance because he controls the Ledger’s random number generator.”
"Rashid said Ledger initially dismissed his findings as implausible. But in a blog post published today, Ledger says it has since fixed the flaw Rashid found — as well as others discovered and reported by different security researchers — in a firmware update that brings Ledger Nano S devices from firmware version 1.3.1 to version 1.4.1 (the company actually released the firmware update on March 6, potentially giving attackers time to reverse engineer Rashid’s method)."
"[T]he firmware update patches three security issues. The update process verifies the integrity of your device and a successful 1.4.1 update is the guarantee that your device has not been the target of any of the patched attack. There is no need to take any other action, your seed / private keys are safe."
"Upgrading the Nano S with the firmware 1.4.1 entirely secures it, as it immediately solves all potential security threats. The firmware update process verifies the integrity of your device and a successful 1.4.1 update is the guarantee that your device has not been tampered with."
A vulnerability existed in early Ledger products which allowed an adversary with physical access to the device to tamper with the random number generation and produce a predictable seed phrase, which they could then use to steal the funds - even if a user had set the device up correctly.
Ledger reported they have since fixed all reported vulnerabilities. It does not appear that any were exploited to steal funds.
HOW COULD THIS HAVE BEEN PREVENTED?
The safest strategy is to always buy the hardware wallet directly from Ledger and always be sure to initialize it yourself and perform all recommended security checks.
When setting up a new wallet of any sort, it is also a good practice to only transfer a small quantity of funds first, transferring the rest if those funds remain safe. This minimizes damage from any theft incident involving immediate removal of the funds. Advanced users may also set up a multi-sig with hardware wallets from different manufacturers all required to sign the outgoing transaction. You should also test the wallet to make sure that you can withdraw funds and didn't make a mistake in the setup.
@btcriku Twitter (Jan 31)
Ledger Hack: Who is Ledger? What Happened? Does the Ledger data breach affect everyone? - YouTube (Jan 31)
Ledger Hack: Am I Affected? Find Out if YOU or a Friend are Affected by the Ledger Data Breach - YouTube (Jan 31)
15-Year-old Finds Flaw in Ledger Crypto Wallet – Krebs on Security (Feb 6)
https://krebsonsecurity.com/wp-content/uploads/2018/03/ledgerattack.pdf (Feb 6)
Ledger Live : Most trusted & secure crypto wallet | Ledger (Feb 13)
@BTChip Twitter (Feb 13)
Firmware 1.4: deep dive into three vulnerabilities which have been fixed - Ledger (Feb 13)
Nano-S attack - YouTube (Feb 13)
Ledger Breach Vastly Underestimated, 270,000 Clients Data Leaked - Crypto Briefing (Jan 30)
Ledger Adds Bitcoin Bounty and New Data Security After Hack - CoinDesk (Jan 31)
