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Shoshana Gordon/Axios

If you run a hospital, a bank, a utility or a city, chances are you'll be hit with a ransomware attack. Given the choice between losing your precious data or paying up, chances are you'll pay.

Why it matters: Paying the hackers is the clear short-term answer for most organizations hit with these devastating attacks, but it's a long-term societal disaster, encouraging hackers to continue their lucrative extortion schemes.

Driving the news: Colonial Pipeline paid hackers almost $5 million in ransom to restore its systems and get gasoline flowing again after a ransomware attack held the country's largest pipeline hostage, which resulted in widespread disruption of gasoline supply.

The big picture: "This creates a collective action problem — the bad guys win so they'll go out and hit someone else," said Betsy Cooper, director of Aspen Tech Policy Hub at the Aspen Institute.

  • "As an organization, you have to take into account the immediate costs versus the cost of your data. The less prepared you are, the worse it's going to be."

Threat level: Code red. Negotiating can backfire.

  • Last week, foreign hackers released sensitive files they stole from the Washington D.C. police department last month, after the department offered to pay $100,000 rather than the $4 million that was demanded to return the data, DCist reported.
  • The hackers reportedly said they'd keep the files public for months, even if the police department offered more than the original ransom.

Of note: The outfit responsible for the Colonial Pipeline attack announced it was shutting down Friday, but there's no sign the larger problem will abate.

By the numbers: Payments to ransomware attackers rose 337% from 2019 to 2020, reaching more than $400 million worth of cryptocurrency, according to figures just released by Chainalysis, a blockchain analysis company.

  • So far in 2021, hackers have raked in more than $81 million.
  • The average ransom payment has risen from $12,000 in the fourth quarter of 2019 to $54,000 in the first quarter of this year.
  • Chainalysis notes these figures are conservative because they are based on reported attacks and payments.

Many attacks at the local level go unreported and unnoticed. Attack disclosure requirements vary state by state.

Zoom in: A hospital near Kansas City, Mo., fell victim to an attack, paid the ransom, and then had to ask the city's government for help making payroll, Mayor Quinton Lucas told Axios.

"It's odd how under-discussed [cybersecurity] is when we talk about infrastructure," Lucas said.

  • "The challenge is not necessarily City Hall getting attacked, it's all the institutions that make up a city — the police department, banks, health systems — that all have different security companies working for them."

The irony: While having several different systems may seem inefficient, it disaggregates the risk, Cooper said.

  • "If you put all your eggs in one vendor's basket, if that vendor has a flaw, then everything that's touched by that vendor will be affected." she said.
  • "Just like you probably don't put all your money into one bank account, you probably shouldn't put all your security with one company," she said.

Between the lines: State and city governments are particularly vulnerable to attacks because it's well-known that public agencies often rely on outdated systems with less robust security defenses.

  • Stimulus funds flowing to states and municipalities could make them attractive targets for hackers.
  • While infrastructure funding is a big topic of conversation in Washington and states, it often comes in the form of grants for a specific purpose, like to repair roads or fix a bridge. Upgrading software and system security is often not thought of in the infrastructure category, and instead tackled separately every five or so years.
  • Prompted by the Colonial Pipeline crisis, the Biden administration issued an executive order last week to encourage data IT data sharing and implement stronger security standards. But it applies to federal agencies and contractors, not the local level.
  • A bipartisan group of House members is proposing to create a $500 million grant program for state and local government cybersecurity upgrades.

Companies that sell services to local governments are also attractive targets. In February, a ransomware attack hit widely used payment processor Automatic Funds Transfer Services.

  • The cybercrime operation known as "Cuba Ransomware" sold the stolen data, including personal addresses and other billing information, on the web, security site BleepingComputer reported.
  • The hack triggered data breach notifications from dozens of cities and agencies in California and Washington state.

Zoom in again: Last February, New Orleans was hit with a massive ransomware attack that crippled the city government. After the attack, the city weeded out old systems and machines, update files and install new software.

Then the pandemic hit, and the city had to quickly go fully remote — but it was ready.

  • "In that way, the cyber attack ended up being a huge blessing in disguise," said Liana Elliot, deputy chief of staff to Mayor LaToya Cantrell.

Upgrading its systems should have been done much sooner, Elliot said, but there was no money or political will — until the attack.

  • "Cities often can't do the things we need to do unless there's a crisis," she said.
  • New Orleans later upped its cyber insurance policy to $10 million.

What to watch: Ransomware groups are getting more hostile and are less likely to restore systems, even when they are paid the ransom, according to Accenture's latest report on cyber threats.

Go deeper

Updated 56 mins ago - Science

NTSB probes crash that killed 10 in Alabama as storm lashes Southeast

Flash-flooding in Bloomington, Indiana, on Saturday. Photo: Jeremy Hogan/SOPA Images/LightRocket via Getty Images

The National Transportation Safety Board announced Sunday that it's investigating a fiery multi-vehicle weekend crash in Alabama that killed 10 people, including nine children, as storms swept the Southeast.

The big picture: Saturday's crash on Interstate 65, south of Montgomery, occurred amid a tropical depression that left 13 people dead in Alabama as it triggered flash floods and spawned tornadoes that razed "dozens of homes," per AP.

Laurel Hubbard to become 1st openly trans athlete to compete at Olympics

New Zealand's Laurel Hubbard at the Gold Coast 2018 Commonwealth Games in Australia, when she became the first openly transgender athlete to represent NZ. Photo: Scott Barbour/Getty Images

The New Zealand Olympic Committee has announced that Laurel Hubbard has been selected for the women's weightlifting team for the Tokyo Games — making her the first openly transgender athlete to compete at the event.

The big picture: Hubbard, 43, is part of a five-member Kiwi weightlifting team and will compete in the women's super heavyweight category. Meanwhile, BMX rider Chelsea Wolfe will become the first openly trans athlete to travel to the Olympics with Team USA, when she arrives in Tokyo as a reserve rider.

American Airlines cuts hundreds of flights amid demand surge

Photo: Joe Raedle/Getty Images

American Airlines announced Sunday that it's cutting some 950 flights from its schedule, including 296 this weekend, to reduce potential pressure on its operations, the Wall Street Journal first reported.

Driving the news: The U.S. vaccine rollout has led to a massive increase in travel bookings. The airline noted in an emailed statement that it's facing an "incredibly quick ramp up of customer demand."