Sprawling 'Operation Digital Eye' Attack Targets European IT Orgs

Chinese hackers almost breached critical European supply chain companies by disguising their malicious activities behind native Microsoft technologies.

It happened during a three-week period, from late June to July, according to researchers from SentinelLabs. A threat actor tied to China's diverse and thriving cyberattack scene targeted large business-to-business (B2B) IT service providers throughout southern Europe, such as cybersecurity vendors and data and infrastructure solutions providers, with the presumed goal of downstream supply chain espionage.

To penetrate these IT vendors — and, presumably, the many clients across the continent to which they enjoy privileged access — the attackers masked their malicious activity behind everyday business tools like Visual Studio Code and Microsoft Azure. And to confuse attribution, they used the same tactics, techniques, procedures (TTPs), and tooling observed across a number of other known Chinese threat actors.

Malware via Microsoft

Infections in the campaign, which researchers dubbed "Operation Digital Eye," began with SQL injections against vulnerable, Internet-facing Web and database servers. Then the attackers dropped PHP Web shells, using filenames specially tailored to the target's environment in order to avoid raising any suspicion. Reconnaissance, lateral movement, and credentials theft followed.

The highlight of the attacks, though, came innocuously packaged as "code.exe." Digitally signed by Microsoft and run as a service using the Windows Service Wrapper, the attackers brought to each of their victims their own portable copy of the Visual Studio Code (VS Code). VS Code is a free, open source editor developed by Microsoft, by far the most popular integrated development environment (IDE) among both new and seasoned developers.

VS Code has also become a proven weapon of Chinese threat actors as of late, thanks to its Remote Tunnels feature. Remote Tunnels is designed to allow developers to access and work on code on remote machines. In a different light, though, it's a perfect malicious payload, enabling command execution and file editing on remote systems in the context of a seemingly innocuous Microsoft program. The attackers behind Operation Digital Eye intended to use VS Code to maintain persistent backdoor access to victims, using innocuous file and service names and storing it in the Temp folder to further blend in with victims' normal business operations.

Tunneling with VS Code isn't quite as simple as loading malware onto a victim's machine, though — it requires a GitHub account and connection with an Azure server. Researchers aren't sure whether the attackers used stolen GitHub and Azure credentials, or registered their own accounts.

What is clear is that they turned this potential roadblock into an advantage, leveraging public cloud infrastructure in Western Europe to make their otherwise suspicious traffic look more legitimate, and more likely to evade notice by security tools. VS Code and Azure network traffic tends to avoid close scrutiny, the researchers noted, and are commonly allowed by application controls and firewall rules. "Combined with the full endpoint access it provides, this makes Visual Studio Code tunneling an attractive and powerful capability for threat actors to exploit," they wrote.

The Trouble in Attributing Chinese Attackers

The actual malware used in Operation Digital Eye did less to clarify than to confuse who, exactly, was behind the attacks.

The most notable tool in the mix, "bK2o.exe," is a modified version of the open source credential stealing tool Mimikatz, designed for pass-the-hash attacks. Its aim is to snag a New Technology LAN Manager (NTLM) hash, in lieu of the targeted user's actual password, to enable the further execution of processes within the user's security context.

BK2o.exe is just one among many Mimikatz variants deployed by several Chinese advanced persistent threats (APTs). Related variants have been observed in Operations Soft Cell and Tainted Love, associated with groups like APT41 and APT10. Researchers from SentinelLabs concluded that there is likely a shared vendor supplying many groups at once, as evidenced by the recent case of iSoon.

Also common to these many groups, besides their malware, is the intent behind their cyberespionage. In the case of Digital Eye, "Southern Europe's role as a Mediterranean hub intersects with China's Belt and Road Initiative, particularly in infrastructure investments like Greece's Port of Piraeus," notes SentinelLabs principal threat researcher Tom Hegel. "Cyber operations in this area likely support China's efforts to safeguard these investments, gain leverage in energy transit routes, and monitor naval activities critical to global trade and security. Economically, Southern Europe offers access to critical industries such as energy, shipping, aerospace, and agriculture, as well as opportunities for scientific and technological espionage, particularly in aerospace and renewable energy. Politically, the region's challenges provide opportunities for influence, allowing China to exploit economic dependencies, shape public sentiment, and potentially weaken EU and NATO unity."

He concludes that "In targeting Southern Europe, China seeks not only to secure competitive advantages but also to deepen its influence in a region vital to global trade, energy flows, and Western alliances."