Exposed: The Path of Ransomware Payments

Hackers’ Preference for a Russian Bitcoin Exchange and the Prevalence of South Korean Victims Are among the Surprises Revealed by Study Led by NYU Tandon Cybersecurity Researcher

Work Could Help Law Enforcement Track Cyber Criminals

The murky ecosystem of ransomware payments comes into focus in new research led by Damon McCoy, an assistant professor of computer science and engineering at the NYU Tandon School of Engineering. Ransomware attacks, which encrypt and hold a computer user’s files hostage in exchange for payment, extort millions of dollars from individuals each month, and comprise one of the fastest-growing forms of cyber attack.  

In a paper slated for presentation at the IEEE Symposium on Security and Privacyin May, McCoy and a team including researchers from the University of California, San Diego; Princeton University; Google; and the blockchain analytics firm Chainalysis provide the first detailed account of the ransomware payment ecosystem, from initial attack to cash-out.

Key findings include the discovery that South Koreans are disproportionately impacted by ransomware campaigns, with analysis revealing that $2.5 million of the $16 million in ransomware payments tracked by the researchers was paid in South Korea. The paper’s authors call for additional research to determine the reason that so many South Koreans are victimized and how they can be protected.

The team also found that most ransomware operators used a Russian bitcoin exchange, BTC-E, to convert bitcoin to fiat currencies. (BTC-E has since been seized by the FBI.) The researchers estimate that at least 20,000 individuals made ransomware payments over the past two years, at a confirmed cost of $16 million, although the actual payment total is likely far higher. 

McCoy and his collaborators took advantage of the public nature of the bitcoin blockchain technology to trace ransom payments over a two-year period¬. Bitcoins are the most common currency of ransomware payments, and because most victims do not own them, the initial bitcoin purchase provides a starting point for tracking payments. Each ransomware victim is often given a unique payment address that directs to a bitcoin wallet where the ransom is collected. The research team tapped public reports of ransomware attacks to identify these addresses and correlate them with blockchain transactions.

To boost the number of transactions available for analysis, the team also executed real ransomware binaries in a controlled experimental environment, essentially becoming victims themselves and making micropayments to real ransom wallets in order to follow the bitcoin trail. “Ransomware operators ultimately direct bitcoin to a central account that they cash out periodically, and by injecting a little bit of our own money into the larger flow we could identify those central accounts, see the other payments flowing in, and begin to understand the number of victims and the amount of money being collected,” McCoy said.

The research team acknowledged that ethical issues prevent exploration of certain aspects of the ransomware ecosystem, including determining the percentage of victims who actually pay to recover their files. McCoy explained that despite having the ability to check for activity connected to a specific payment address, doing so would effectively “start the clock” and potentially cause victims to either pay a double ransom or lose the opportunity to recover their files altogether.

Criminal use of cryptocurrencies is one of McCoy’s research focuses. He and fellow researchers previously tracked human traffickers through their use of Bitcoin advertising.

The most recent research was supported by grants from the National Science Foundation, Google, and Comcast.

About the New York University Tandon School of Engineering
The NYU Tandon School of Engineering dates to 1854, the founding date for both the New York University School of Civil Engineering and Architecture and the Brooklyn Collegiate and Polytechnic Institute (widely known as Brooklyn Poly). A January 2014 merger created a comprehensive school of education and research in engineering and applied sciences, rooted in a tradition of invention and entrepreneurship and dedicated to furthering technology in service to society. In addition to its main location in Brooklyn, NYU Tandon collaborates with other schools within NYU, the country’s largest private research university, and is closely connected to engineering programs at NYU Abu Dhabi and NYU Shanghai. It operates Future Labs focused on start-up businesses in downtown Manhattan and Brooklyn and an award-winning online graduate program. For more information, visit