1 big thing: The burgeoning startup market capitalizing on AI security

Illustration of a briefcase with a binary code combination lock with ones and and zeroes for options. 

Most U.S. adults don't believe benefits of AI outweigh the risks, new survey finds

2. Zoom in: Our biggest AI security fears

3. Mandiant CEO's tips for cyber defenders

4. Catch up quick

5. 1 fun thing

Images of cats cuddling at a D.C. cat cafe 

📺 I caught up on the new season of Apple TV+'s "The Morning Show" this weekend, and to my surprise, one of the episodes follows a ransomware attack targeting the morning broadcast! 10/1o, would recommend. 

📬 Have thoughts, feedback or scoops to share? codebook@axios.com.

Today's newsletter is 1,556 words, a 6-minute read. 

Thanks to Scott Rosenberg and Megan Morrone for editing and Khalid Adad for copy editing this newsletter.

If you like Axios Codebook, spread the word.

Codebook

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blue

Decode key cybersecurity news and insights. With Sam Sabin.

Axios Codebook

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Companies struggle to stop social-engineering attacks

1 big thing: Fighting the social engineers

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2. Why Cisco's $28B Splunk purchase makes sense

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3. State hackers target "undermonitored" regions

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😎 TGIF, everyone. Welcome back to Codebook.

🏝️ The newsletter is taking a break next week to recharge. I'll be back in your inbox Oct. 3. 

📬 Have thoughts, feedback or scoops to share while I'm away? codebook@axios.com.

Today's newsletter is 1,453 words, a 5.5-minute read. 

Biden administration, tech industry draft a long-term plan to secure open source software

1 big thing: A long-term plan to secure open-source software

Illustration of a quill resting in a computer as if it were an ink well. 

2. MGM takes systems offline after cyberattack 

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3. Cars' "unmatched power" to spy on drivers

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Happy Tuesday! Welcome back to Codebook. 

🏃🏻‍♀️ Shoutout to everyone else finding themselves running between all the meetings and events this week! Sure feels like summer's over. 

Today's newsletter is 1,368 words, a 5-minute read. 

Thanks to Scott Rosenberg for editing and Khalid Adad for copy editing this newsletter.

MGM faces the fallout from nearly week-long cyberattack

1 big thing: MGM faces fallout from nearly weeklong cyberattack

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Cybercrime gangs give competing casino narratives

2. Cybercrime gangs give competing MGM narratives

Illustration of a computer wearing a bandit's mask. 

Iranian hackers target satellite, defense firms, Microsoft says

3. Iranian hackers target satellite, defense firms

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photos of downed slot machines and ATM at MGM National Harbor

🌀 Nothing seems to hold the cyber community's attention more than a couple of cyberattacks on casino chains! Let's break down what's going on. 

📬 But first: Have thoughts, feedback or scoops to share? codebook@axios.com.

Today's newsletter is 1,534 words, a 6-minute read. 

Layoffs hit the once-immune cyber industry

1 big thing: Layoffs hit the once-immune cyber industry

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China has started using AI in influence operations, Microsoft says

2. China leaning on AI in disinformation schemes

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Apple warns of two exploited security flaws

3. Apple warns of two exploited security flaws

Illustration of arrow cursors aimed at Apple's logo.

🎸 I've been to my fair share of concerts this year, but no other artists' merch has compared to what Death Cab for Cutie and The Postal Service offered in D.C. this week. They even had socks! 

Today's newsletter is 1,418 words, a 5.5-minute read. 

National

Exactly who is behind the apparent cyberattack on MGM this week isn't clear yet — but two cybercrime gangs are arguing they were involved.

Driving the news: Members of hacking group Scattered Spider told news outlets Thursday that they were the ones who first targeted MGM's networks last week. 

However, ransomware gang Alphv, also known as Black Cat, posted a long statement Thursday to its dark-web site claiming it was actually responsible.

While Alphv claimed responsibility for the attack, the statement did not address whether Scattered Spider was acting as an Alphv affiliate, or a group that carries out an attack using ransomware developed by Alphv.

Why it matters: The dueling narratives are adding to an already chaotic news cycle that's been filled with social media-fueled speculation. 

No one will know for sure who targeted MGM until the company or law enforcement provides public details about the incident.

Threat level: Both groups are seen as major cybercrime threats in their own right, experts say. 

Scattered Spider is believed to be a group of young adults based in the U.S. and the U.K. who are well known for using social engineering to launch attacks, according to Bloomberg. 

They've also been seen deploying Alphv's encryption in recent months, Charles Carmakal, chief technology officer at Google Cloud's Mandiant, wrote on LinkedIn this week.

Scattered Spider is well known for an attack that hit more than 130 organizations last year and stole more than 10,000 employees' login credentials.

Meanwhile, Alphv has its own reputation for dangerous, widespread attacks. 

The group, which is believed to be based in Russia, is known for its ruthless extortion techniques. Its members released stolen photos from breast cancer patients' examinations while extorting the Lehigh Valley Health Network earlier this year, for instance.

Other victims have included Western Digital and Sun Pharmaceuticals.

The big picture: Identities in the ransomware world are obfuscated on purpose to make it more difficult for law enforcement to pinpoint who's behind an attack.

Not only is it typical for a larger ransomware operator to claim credit for an attack that an affiliate launched, but it's also possible for a larger group like Alphv to launch an entire attack on its own, in house. 

Be smart: MGM, the FBI and third-party cyber incident response firms will have the most reliable information for who's behind the attack and how it happened.

Sign up for Axios' cybersecurity newsletter Codebook here

posted a long statement to their dark-web site

an attack that hit more than 130 organizations 

released stolen photos from breast cancer patients' examinations

The dueling narratives add to an already chaotic news cycle that's been filled with social media-fueled speculation.

Cybersecurity

Data privacy

Exactly who is behind the apparent cyberattack on MGM this week isn&#x27;t clear yet — but two cybercrime gangs are arguing they were involved.Driving the news: Members of hacking group Scattered Spider <a class="gtmContentClick" data-vars-link-text="told news outlets" data-vars-click-url="https://www.ft.com/content/a25d2897-b0ce-4ba7-92ed-ff5df09d1b47" data-vars-content-id="01b169bd-3359-48b1-9908-7ec31dc0dea8" data-vars-headline="Cybercrime gangs give competing casino narratives" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.ft.com/content/a25d2897-b0ce-4ba7-92ed-ff5df09d1b47" target="_blank">told news outlets</a> <a class="gtmContentClick" data-vars-link-text="Thursday" data-vars-click-url="https://techcrunch.com/2023/09/14/mgm-cyberattack-outage-scattered-spider/" data-vars-content-id="01b169bd-3359-48b1-9908-7ec31dc0dea8" data-vars-headline="Cybercrime gangs give competing casino narratives" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://techcrunch.com/2023/09/14/mgm-cyberattack-outage-scattered-spider/" target="_blank">Thursday</a> that they were the ones who first targeted MGM&#x27;s networks last week.

From the Valley to D.C., Big Tech players like Facebook, Google and Amazon are under more scrutiny than ever as new technology develops and privacy and antitrust concerns grow in lockstep with companies’ ambitions.

Technology

Companies need to rethink their cyber defense strategies as cybercriminals fine-tune their social-engineering tactics to target vulnerable employees, experts told Axios. 

Why it matters: Recent cyberattacks targeting casino giants MGM Resorts and Caesars Entertainment have highlighted the challenges companies still have in defending against social-engineering attacks.

Catch up quick: Caesars said in a public 8-K filing last week that hackers originally broke into its networks after targeting one of its outsourced IT vendors with a social-engineering attack. 

Reports suggest that the apparent cyberattack on MGM started in a similar way.

The big picture: As companies have gotten better at detecting traditional phishing emails, malicious hackers have had to turn to new techniques to make their lures more believable.

For instance, one group known as Scattered Spider has made text-message phishing and fake phone calls a core part of its attack strategy. 

The group has been linked to the MGM and Caesars incidents, and its hackers have successfully broken into more than 100 other companies during the group's roughly two-year existence. 

By the numbers: 74% of data breaches between November 2021 and October 2022 involved a human element via an error, privilege misuse, social engineering or use of stolen credentials, according to Verizon's 2023 data breach investigations report. 

The number of cyber incidents involving a fake story or other pretext — the form of social engineering seen in recent high-profile attacks — also doubled last year, per Verizon. 

Between the lines: Personalizing employee training and awareness programs can go a long way in preventing successful social-engineering attacks, Ashley Rose, CEO and co-founder of Living Security, told Axios. 

Companies are often already collecting data about which employees reuse passwords, who needs access to sensitive data for their roles, and which teams are receiving the largest volume of scam emails.

Using that data, organizations can easily tailor internal security controls, such as implementing stricter email filters, for those who are most at risk of being duped by an email or call, Rose said. 

The intrigue: To go beyond awareness and training programs, companies should also prepare for the inevitability that their employees will be duped by a phone call, text message or email, Kimberly Goody, head of cybercrime analysis at Mandiant, told Axios.

Limiting the number of employees who have access to sensitive corporate data, as well as employing stricter password reset and multifactor authentication tools, could help prevent attackers from getting too far into a network, she added.

What they're saying: "They don't need the social engineering to work every single time," Goody said of malicious actors. "They just need it to work sometimes — once in a blue moon is enough for them." 

Threat level: The rising availability of artificial intelligence tools will only make social-engineering attacks easier to fall for in the coming years, experts say. 

AI tools could help cybercriminals do everything from dig up the information they need about an organization's employees on the dark web to writing more believable phishing emails, Rose said. 

Already, researchers have found that generative AI tools have allowed cybercriminals to build an entire copy of someone's voice for scam calls using as little as three seconds of a clip. 

The bottom line: Companies shouldn't stop their human-centered defenses at baseline awareness and trainings. 

Leaning on data to determine which employees are most at risk of falling for a phishing attempt and building stronger internal data controls are the best defenses. 

Sign up for Axios' cybersecurity newsletter Codebook here.

 Verizon's 2023 data breach investigations report

as little as three seconds of someone's voice

Recent attacks on casino giants MGM Resorts and Caesars Entertainment highlight the dangers of social engineering.

Companies need to rethink their cyber defense strategies as cybercriminals fine-tune their social-engineering tactics to target vulnerable employees, experts told Axios. Why it matters: Recent cyberattacks targeting casino giants <a class="gtmContentClick" data-vars-link-text="MGM Resorts" data-vars-click-url="https://www.axios.com/2023/09/15/mgm-fallout-cyberattack" data-vars-content-id="35f57a7d-ecdf-48a4-8dcc-4fdf7735b08f" data-vars-headline="Companies struggle to stop social-engineering attacks" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/2023/09/15/mgm-fallout-cyberattack" target="_self">MGM Resorts</a> and <a class="gtmContentClick" data-vars-link-text="Caesars Entertainment" data-vars-click-url="https://www.axios.com/2023/09/14/caesars-entertainment-is-latest-casino-chain-to-confirm-it-was-hit-by-a-cyberattack" data-vars-content-id="35f57a7d-ecdf-48a4-8dcc-4fdf7735b08f" data-vars-headline="Companies struggle to stop social-engineering attacks" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/2023/09/14/caesars-entertainment-is-latest-casino-chain-to-confirm-it-was-hit-by-a-cyberattack" target="_self">Caesars Entertainment</a> have highlighted the challenges companies still have in defending against social-engineering attacks.

Iranian hackers have hacked dozens of companies in the defense, satellite and pharmaceutical sectors this year using a fairly unsophisticated, blunt hacking technique, Microsoft warned in a new report. 

Why it matters: Many of these companies are based in the U.S., and the breaches come amid heavy U.S. sanctions targeting Iranian oil and petrochemical sales. 

Details: Microsoft said Thursday that Iranian hacking group Peach Sandstorm — which other firms also refer to as APT33, Elfin or Refined Kitten — has been breaking into these companies by trying to guess multiple user accounts' passwords. 

The password-spraying campaign took place between February and July this year, Microsoft found.

In some cases, the hackers were able to exfiltrate data, and in others, they just lurked on the networks to see what intelligence they could gather. 

Yes, but: The Iranian group targeted thousands of companies as part of this monthslong campaign — but was able to access only a small percentage of those organizations, Microsoft said.

The big picture: Peach Sandstorm's past campaigns are known to have targeted aviation, construction, defense, education, energy, financial services, health care, government, satellite and telecommunications companies.

What they're saying: "The capabilities observed in this campaign are concerning as Microsoft saw Peach Sandstorm use legitimate credentials (gleaned from password spray attacks) to authenticate to targets' systems, persist in targets' environments, and deploy a range of tools to carry out additional activity," Microsoft wrote in the report.

Threat level: Iran was likely using the attack for routine espionage, Microsoft said, rather than for a destructive cyberattack.

However, the U.S. intelligence community has warned that Iran is "more willing than before to target countries with stronger capabilities" as part of its state-backed cyber operations.

targeting Iranian oil and petrochemical sales

Many of these companies are based in the U.S., and the breaches come amid heavy U.S. sanctions targeting Iran.

Iranian hackers have hacked dozens of companies in the defense, satellite and pharmaceutical sectors this year using a fairly unsophisticated, blunt hacking technique, Microsoft warned in <a class="gtmContentClick" data-vars-link-text="a new report" data-vars-click-url="https://www.microsoft.com/en-us/security/blog/2023/09/14/peach-sandstorm-password-spray-campaigns-enable-intelligence-collection-at-high-value-targets/" data-vars-content-id="711ae905-b0ae-441e-a870-0a491132eb5a" data-vars-headline="Iranian hackers target satellite, defense firms, Microsoft says" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.microsoft.com/en-us/security/blog/2023/09/14/peach-sandstorm-password-spray-campaigns-enable-intelligence-collection-at-high-value-targets/" target="_blank">a new report</a>. Why it matters: Many of these companies are based in the U.S., and the breaches come amid heavy U.S. sanctions <a class="gtmContentClick" data-vars-link-text="targeting Iranian oil and petrochemical sales" data-vars-click-url="https://www.aljazeera.com/news/2023/3/2/us-issues-more-iran-sanctions-amid-stalled-diplomacy" data-vars-content-id="711ae905-b0ae-441e-a870-0a491132eb5a" data-vars-headline="Iranian hackers target satellite, defense firms, Microsoft says" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.aljazeera.com/news/2023/3/2/us-issues-more-iran-sanctions-amid-stalled-diplomacy" target="_blank">targeting Iranian oil and petrochemical sales</a>.

As Washington and Silicon Valley rush to mitigate AI's security risks, a new crop of entrepreneurs and investors are clamoring to monetize the latest emerging security category.

Why it matters: AI security startups are just the latest cohort trying to capitalize on the craze around generative AI and large-language models. 

And the interest in their offerings exists as AI operators and government officials host meeting after meeting to figure out how to best regulate AI before it becomes even more widespread. 

The big picture: Security experts are worried about a long list of threats to AI models, including prompt injection (where users trick large-language models to go against their rules and share malicious outputs); data leaks of sensitive corporate information that the models ingest; and run-of-the-mill hacks of AI models' training data. 

The solutions AI security startups are offering either tackle a subset of these problems or try to solve all of them. 

But just like the industry's overall understanding of AI security threats, these startups are still quite early in their quest to secure artificial intelligence, Avivah Litan, distinguished VP analyst at Gartner, told Axios. 

By the numbers: Investors are increasingly jumping at the chance to pour money into the next big AI security company.  

In the first three quarters of 2023, AI security startups have raised roughly $130.7 million, according to PitchBook data shared with Axios — already surpassing the $122.2 million raised in all of 2022.

Driving the news: HiddenLayer, an AI startup that emerged from stealth last year, announced a $50 million Series A funding round Tuesday led by M12 and Moore Strategic Ventures.

The company is just the latest in a long string of startups promising to protect AI models — including CalypsoAI, Protect AI, and others — that have raised money in recent months. 

Between the lines: Many of these startups are tackling AI security in a slightly different way.

CalypsoAI focuses on auditing the sensitive data in an enterprise and preventing that data from being sucked into outside AI models. Their customer base is largely in the U.S. government, including the Defense Department and parts of the intelligence community. 

HiddenLayer provides a solution similar to endpoint security tools to review the outputs from AI models and ensure malicious actors didn't tamper with the algorithms through prompt injection or other misuse. 

Lakera AI, a security startup based in Switzerland, employs a similar idea and offers a firewall-like tool for AI model inputs and outputs to detect AI "hallucinations," prompt injections and other misuses. 

The intrigue: Some of the AI security startups catching investors' eyes are attracting more demand than they originally anticipated since OpenAI's ChatGPT became available to the public.

While HiddenLayer CEO Chris Sestito told Axios his company's approach hasn't changed, he said potential buyers have become more aware and educated about the risks that AI models pose. 

CalypsoAI raised its recent $23 million round to further fund the development of its large-language model security solutions.

Lakera AI originally started in 2021 by securing biometrics and medical imaging algorithms, but pivoted to securing AI models at the end of 2022 due to customer demand, David Haber, founder and CEO of the company, told Axios. 

Zoom out: The exit strategy for these startups is still up in the air. 

Some could sell their products to larger cybersecurity vendors, like CrowdStrike, Litan said. 

But others told Axios they see a market for AI security to become its own standalone product vertical, much in the same way that companies buy from standalone cloud security vendors. 

Yes, but: Enterprises are still in the early stages of figuring out how they'll use AI internally, and until they land on an answer, they're not going to know what kinds of AI security startups to buy from, Litan said. 

Gartner estimates that the market of AI security and risk management companies will be worth $150 million by 2025, Litan said. 

"It's very much an influx market," she added. "There's definitely demand, it's just early."

trick large-language models to go against their rules 

data leaks of sensitive corporate information

Inside the startup market trying to capitalize on AI security

The new AI security startups are winning attention in a climate of concern over AI-related risks.

As Washington and Silicon Valley rush to mitigate AI&#x27;s security risks, a new crop of entrepreneurs and investors are clamoring to monetize the latest emerging security category.Why it matters: AI security startups are just the latest cohort <a class="gtmContentClick" data-vars-link-text="trying to capitalize on the craze" data-vars-click-url="https://www.axios.com/2023/02/28/chatgpt-generative-ai-products-microsoft" data-vars-content-id="9a500cdf-1b36-4ba1-b48d-5601bba2faeb" data-vars-headline="Inside the startup market trying to capitalize on AI security" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/2023/02/28/chatgpt-generative-ai-products-microsoft" target="_self">trying to capitalize on the craze</a> around generative AI and large-language models.

Data: Mitre-Harris Poll 2023 AI Survey; Chart: Axios Visuals

The majority of U.S. adults don't believe the benefits of artificial intelligence outweigh the risks, according to a new Mitre-Harris Poll released Tuesday.

By the numbers: 54% of the 2,063 adults in a Mitre-Harris Poll survey in July said they were more concerned about the risks of AI than they were excited about the potential benefits. 

At the same time, 39% of adults said they believed today's AI technologies are safe and secure — down 9 points from the previous survey in November 2022. 

Why it matters: AI operators and the tech industry are eyeing new regulations and policy changes to secure their models and mitigate the security and privacy risks associated with them. 

The new survey data is some of the first to highlight the growing support for these regulatory efforts.

What they're saying: "While the public has started to benefit from new AI capabilities such as ChatGPT, we've all watched as chatbots have spread political disinformation and shared dangerous medical advice," said Douglas Robbins, vice president of engineering and prototyping at the nonprofit security research and development firm Mitre, in a statement. 

"Strengthening existing government regulation and increasing public and private investments in AI assurance can play a critical role in addressing these concerns," he added.

Between the lines: It's pretty typical for adults to be anxious about a new innovation and its potential impacts in the early days of its usage. 

Details: Respondents were more concerned about AI being used in malicious cyberattacks (80%) and identity theft schemes (78%) than they were about it being used to cause "harm to disadvantaged populations" (66%) or replacing their jobs (52%). 

Roughly three-fourths of respondents were also concerned about AI technologies being used to harvest and sell their personal data. 

Yes, but: Not all demographics feel the same wariness about AI technologies. 

57% of Gen Z respondents and 62% of millennials said they were more excited about the potential benefits of AI than they were worried about the risks. 

And men were typically more excited than concerned about AI technologies (51%) than women (40%).

54% in a Mitre-Harris Poll survey said they're more concerned about the risks of AI than excited about the benefits.

The majority of U.S. adults don&#x27;t believe the benefits of <a class="gtmContentClick" data-vars-link-text="artificial intelligence" data-vars-click-url="https://www.axios.com/technology/automation-and-ai" data-vars-content-id="a7cc4030-02b5-45ce-b9a5-2a73e1f48a0e" data-vars-headline="Most U.S. adults don&#x27;t believe benefits of AI outweigh the risks, new survey finds" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/technology/automation-and-ai" target="_self">artificial intelligence</a> outweigh the risks, according to a <a class="gtmContentClick" data-vars-link-text="new Mitre-Harris Poll" data-vars-click-url="https://www.mitre.org/news-insights/news-release/public-trust-ai-technology-declines-amid-release-consumer-ai-tools" data-vars-content-id="a7cc4030-02b5-45ce-b9a5-2a73e1f48a0e" data-vars-headline="Most U.S. adults don&#x27;t believe benefits of AI outweigh the risks, new survey finds" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.mitre.org/news-insights/news-release/public-trust-ai-technology-declines-amid-release-consumer-ai-tools" target="_blank">new Mitre-Harris Poll</a> released Tuesday.By the numbers: 54% of the 2,063 adults in a Mitre-Harris Poll survey in July said they were more concerned about the risks of AI than they were excited about the potential benefits.

Sam Sabin

Stories

Companies struggle to stop social-engineering attacks

Most U.S. adults don't believe benefits of AI outweigh the risks, new survey finds

Inside the startup market trying to capitalize on AI security

Cybercrime gangs give competing casino narratives

Iranian hackers target satellite, defense firms, Microsoft says

Newsletter editions

💪🏻 Social-engineering defenses

💸 AI security startup frenzy

🎰 Casino cyber chaos

🏛️ D.C.'s open-source problem

💼 Cutting cyber jobs