Incident: Crypto-currency Hardware Wallet Hacked by Teenager: Ledger Nano S

Published Date: 2018-03-21

Postmortem Analysis
Timeline 1. The software failure incident of the teenager hacking the Ledger Nano S crypto-currency wallet happened a few months before the article was published on March 21, 2018 [69267]. Therefore, the estimated timeline for the software failure incident would be around late 2017 or early 2018.
System 1. Ledger Nano S hardware wallet 2. Ledger Nano Blue hardware wallet
Responsible Organization 1. The British 15-year-old hacker who discovered and exploited the vulnerability in the Ledger Nano S hardware wallet [69267].
Impacted Organization 1. Ledger Nano S and Ledger Nano Blue users were impacted by the software failure incident [69267].
Software Causes 1. The software cause of the failure incident was a vulnerability in the Ledger Nano S hardware wallet, which allowed a 15-year-old hacker to write code that provided a backdoor access to the device, enabling potential theft of funds [69267].
Non-software Causes 1. Lack of proper physical security measures in the design of the Ledger Nano S and Nano Blue hardware wallets, allowing for unauthorized access [69267].
Impacts 1. The software failure incident allowed a 15-year-old hacker to gain unauthorized access to the Ledger Nano S hardware wallet, potentially enabling the attacker to drain the wallet of funds [69267]. 2. The flaw in the Ledger Nano S also affected another model, the Nano Blue, and a fix for this vulnerability was not immediately available, causing potential security risks for users of these devices [69267]. 3. The incident highlighted the importance of physical security for hardware wallets, as attackers with physical access could modify the device to steal funds from customers, emphasizing the need for trusted component makers and merchants [69267].
Preventions 1. Implementing thorough security testing and code reviews during the development process to identify and address vulnerabilities before the product is released [69267]. 2. Regularly updating and patching the firmware of the hardware wallet to fix any discovered security flaws [69267]. 3. Offering bug bounty programs to incentivize ethical hackers to report vulnerabilities and issues, encouraging responsible disclosure [69267].
Fixes 1. Issuing a security fix for the Ledger Nano S device to address the backdoor vulnerability exploited by the teenager [69267]. 2. Developing and implementing a security patch for the affected model, Nano Blue, to prevent similar attacks in the future [69267].
References 1. Saleem Rashid's blog [69267] 2. Quartz magazine [69267] 3. Reddit comments by Ledger's chief executive Eric Larcheveque [69267] 4. Craig Young, a researcher at security firm Tripwire [69267]

Software Taxonomy of Faults

Category Option Rationale
Recurring unknown (a) The software failure incident related to the Ledger Nano S hardware wallet being hacked by a teenager has not been reported to have happened again within the same organization or with its products and services. The incident was specifically highlighted as a vulnerability discovered by the British 15-year-old hacker in the Ledger Nano S device [69267]. (b) The software failure incident of a hardware wallet being hacked has not been reported to have happened again at other organizations or with their products and services in the provided articles. The focus of the incident was on the specific vulnerability found in the Ledger Nano S device and the security fix issued by the firm behind the wallet [69267].
Phase (Design/Operation) design (a) The software failure incident in the article is related to the design phase. The incident occurred due to a flaw in the design of the Ledger Nano S hardware wallet, which allowed a 15-year-old hacker to write code that provided a backdoor into the device, potentially enabling the attacker to drain the wallet of funds [69267]. The flaw in the design of the device's micro-controllers, specifically the one that stores the private key, allowed for this vulnerability to be exploited, highlighting a design weakness in the product. (b) The software failure incident is not related to the operation phase or misuse of the system.
Boundary (Internal/External) within_system (a) within_system: The software failure incident in this case was due to contributing factors that originated from within the system. The 15-year-old hacker was able to exploit a vulnerability in the Ledger Nano S hardware wallet by writing code that gave him a backdoor access to the device, allowing him to potentially drain the wallet of funds [69267]. The flaw was related to the device's micro-controllers and the inability to differentiate between genuine firmware and outsider code, which are internal system components that were exploited by the hacker.
Nature (Human/Non-human) non-human_actions, human_actions (a) The software failure incident in this case was primarily due to non-human actions. The incident involved a hardware wallet designed to store crypto-currencies being hacked by a 15-year-old through code he had written, which gave him a backdoor access to the Ledger Nano S device [69267]. (b) Human actions also played a role in this software failure incident. The teenager who hacked the wallet had sent the code he developed to the company a few months prior, but he had not been paid a bounty for discovering the vulnerability. He decided to publish the information after feeling that the company's response was inaccurate and not properly addressing the issue, leading to a public disclosure of the vulnerability [69267].
Dimension (Hardware/Software) hardware (a) The software failure incident in this case is related to hardware. The incident involved a hardware wallet designed to store crypto-currencies, specifically the Ledger Nano S, being hacked by a teenager. The hacker was able to exploit a vulnerability in the device's micro-controllers, which are hardware components, to gain access to the private key stored in the wallet [69267]. The flaw in the hardware allowed the attacker to potentially drain the wallet of funds, highlighting a failure originating in the hardware design. (b) The software failure incident in this case is not directly related to software issues but rather to a hardware vulnerability. The hacker exploited a flaw in the hardware design of the Ledger Nano S device, rather than a software bug or fault, to gain unauthorized access to the private key stored in the wallet [69267].
Objective (Malicious/Non-malicious) malicious (a) The software failure incident in this case is malicious. The incident involved a British 15-year-old hacker who wrote code to create a backdoor into the Ledger Nano S hardware wallet, allowing a malicious attacker to drain the wallet of funds [69267]. The hacker sent the code to Ledger a few months before going public, but he was not paid a bounty. The incident was considered serious enough that Ledger issued a security fix for the vulnerability. Ledger's CEO downplayed the severity of the issue, but security experts highlighted the risk of attackers with physical access being able to modify the hardware wallet to steal funds from customers [69267].
Intent (Poor/Accidental Decisions) poor_decisions [a] The intent of the software failure incident in this case seems to be more aligned with poor_decisions. The incident involved a teenager hacking into a hardware wallet designed to store crypto-currencies by exploiting a flaw in the device's micro-controllers. The hacker, Saleem Rashid, discovered a backdoor that could allow malicious attackers to drain the wallet of funds. Despite Rashid responsibly disclosing the vulnerability to the wallet manufacturer, Ledger, the company's response and handling of the situation were criticized. Ledger's chief executive's comments on Reddit were deemed inaccurate and the decision-making process regarding the security fix was questioned, leading to concerns about the proper explanation of the vulnerability to customers [69267].
Capability (Incompetence/Accidental) development_incompetence, accidental (a) The software failure incident in this case can be attributed to development incompetence. The incident involved a 15-year-old British hacker who was able to hack into the Ledger Nano S hardware wallet by exploiting a flaw in the device's micro-controllers. The hacker wrote code that provided a backdoor access to the wallet, potentially allowing malicious attackers to drain funds from the wallet [69267]. (b) Additionally, the incident can also be categorized as accidental, as the flaw in the device's security was not intentional but rather a result of the vulnerability in the design of the hardware wallet. The firm behind the wallet had to issue a security fix to address the vulnerability, indicating that the flaw was not deliberately introduced but was an unintended consequence of the device's architecture [69267].
Duration permanent (a) The software failure incident in this case appears to be permanent. The incident involved a 15-year-old hacker finding a vulnerability in the Ledger Nano S hardware wallet, allowing for potential theft of funds. The firm behind the wallet issued a security fix, but it was mentioned that a fix for another model, the Nano Blue, would not be available for several weeks [69267]. The fact that a fix was needed and that the vulnerability could potentially lead to theft of funds indicates a permanent failure until the security fix is implemented.
Behaviour value, other (a) crash: The incident described in the article does not involve a crash where the system loses state and stops performing its intended functions. Instead, it involves a security vulnerability that allows an attacker to potentially drain funds from the Ledger Nano S wallet [69267]. (b) omission: The incident does not involve the system omitting to perform its intended functions at an instance(s). The vulnerability discovered by the teenager allowed unauthorized access to the private key stored in the hardware wallet, rather than the system omitting any specific function [69267]. (c) timing: The incident is not related to timing issues where the system performs its intended functions but at the wrong time. It is more about a security flaw that could potentially allow an attacker to access funds stored in the wallet [69267]. (d) value: The software failure incident does involve the system performing its intended functions incorrectly. The vulnerability discovered by the teenager allowed unauthorized access to the private key stored in the Ledger Nano S wallet, potentially leading to the theft of funds [69267]. (e) byzantine: The incident does not exhibit characteristics of a byzantine failure where the system behaves erroneously with inconsistent responses and interactions. It is more about a specific security vulnerability that could be exploited to access private keys stored in the hardware wallet [69267]. (f) other: The behavior of the software failure incident can be categorized as a security vulnerability that allows unauthorized access to the private key stored in the Ledger Nano S hardware wallet, potentially leading to the theft of funds. The incident highlights the importance of addressing security flaws in hardware devices that store sensitive information like private keys for cryptocurrencies [69267].

IoT System Layer

Layer Option Rationale
Perception None None
Communication None None
Application None None

Other Details

Category Option Rationale
Consequence property, non-human, theoretical_consequence (d) property: People's material goods, money, or data was impacted due to the software failure The software failure incident described in the article involves a 15-year-old British hacker who found a way to hack into the Ledger Nano S hardware wallet, a device designed to store crypto-currencies securely. The hacker was able to write code that provided a backdoor into the device, potentially allowing a malicious attacker to drain the wallet of funds. This means that users who relied on the security of the Ledger Nano S to protect their crypto-currency holdings could have been at risk of losing their funds [69267].
Domain finance (a) The failed system was related to the finance industry as it involved a hardware wallet designed to store crypto-currencies [69267].

Sources

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