A 44-year-old Chinese national has been brought to the United States from the Netherlands to answer federal charges tied to a cryptocurrency investment scheme that drained nearly $37 million from 174 American victims.
Zhen Zhao was arraigned in California after his extradition, prosecutors said, following a federal indictment handed down in August 2025 charging him with conspiracy to commit money laundering. If convicted, he faces up to 20 years in federal prison.
Zhao is accused of running what investigators call a "pig butchering" operation, a type of confidence scam that has become one of the fastest-growing financial crimes in the world. The name reflects how the fraud works: operators spend weeks or months cultivating trust with their targets before stealing everything from them at once.
How the scheme worked
According to court documents, Zhao and his co-conspirators reached victims through unsolicited text messages, social media platforms, phone calls, and online dating services. The initial contact was typically low-stakes, a misdirected text, a friendly exchange that seemed accidental, or a casual introduction through a dating app. Over time, the operators steered conversations toward investment opportunities, eventually directing victims to what appeared to be functioning cryptocurrency trading platforms.
The platforms were fabricated. Built to resemble real exchanges, they showed account balances growing steadily over time, giving victims every reason to keep putting money in. When victims eventually tried to withdraw their funds, they were blocked, hit with invented fees, or simply cut off. Their money was already gone.
The ring funneled more than $36.9 million from U.S. bank accounts into an account at Deltec Bank in the Bahamas, registered under the name Axis Digital Limited. From there, the bank was directed to convert the deposited money into Tether, a dollar-pegged stablecoin widely used in fraud for its stability and ease of transfer. That Tether was then moved to a digital asset wallet controlled in Cambodia, where it was passed up to the leaders of scam centers operating in the region.
Cambodia has become a significant hub for this type of operation. Criminal syndicates there have turned large-scale cryptocurrency fraud into core business, often staffing compound facilities with trafficked workers from across Asia who are forced to run these schemes under threat of violence. The money chain in the Zhao case reflects that geography directly.
Eight accomplices, two already sentenced
Zhao was not running the operation alone. Eight co-conspirators have already pleaded guilty in connection with the same scheme. Two have been sentenced so far, one to 51 months and another to 46 months in federal prison. The remaining cases are moving through the courts.
The extradition itself was the result of months of legal coordination between U.S. prosecutors, the State Department, and Dutch authorities. The Netherlands, which maintains a functioning extradition treaty with the United States, processed Zhao's transfer back to face trial in California.
A problem that keeps growing
This case sits inside a much larger crisis. The FBI's 2025 Internet Crime Report recorded more than $8.6 billion in losses from investment scams over the course of a single year, up from $6.5 billion the year before. Those figures came from roughly 73,000 complaints, and investigators routinely note that reported numbers reflect only a portion of real losses, since many victims never file a report out of embarrassment or because they do not know where to turn.
Pig butchering has become the dominant form of cryptocurrency fraud in the United States. The FBI ran a proactive victim notification program that reached more than 4,300 pig butchering victims in a single year, warning people before they lost everything. Despite those efforts, the dollar figures keep climbing.
The Department of Justice has treated these cases as a priority. In December 2023, federal prosecutors in California charged four people with laundering more than $80 million connected to similar cryptocurrency investment scams, using shell companies and hundreds of individual banking transactions to move stolen money internationally. Prosecutors at the time described the mechanics as nearly identical to what Zhao and his network allegedly ran.
What victims should do
Anyone who believes they were targeted by a pig butchering scam can file a report with the FBI's Internet Crime Complaint Center at IC3.gov. Investigators ask that victims preserve all records of communications, platform names, cryptocurrency wallet addresses, transaction IDs, and any banking information they shared during the fraud.
For Zhao, the arraignment in California is the start of what will likely be a long legal process. With eight alleged co-conspirators already pleading guilty, prosecutors appear to have a functioning case built around his network. Whether he opts for trial or takes a similar path remains to be determined.
A security firm has found that placing a disguised instruction file inside a user's Downloads folder is enough to manipulate AI coding agents into installing malware, with one leading tool executing a known-malicious package in more than nine out of ten test runs.
The finding comes from Forever Security, which said one of its customers had an `AGENTS.md` file sitting in their Downloads folder. The file was designed to look like routine engineering notes, but its actual purpose was to instruct any coding agent that opened the folder to install `function-color`, a package tied to the MALFEX npm supply chain campaign. Forever stopped the agent before the installation completed. The firm could not determine how the file got there.
How the Malware Chain Works
`function-color` is a wrapper package. It carries no payload of its own but silently installs `function-flag` as a dependency. That package runs a postinstall script that downloads a Windows executable from a remote host, saves it as `node.exe` inside `%APPDATA%`, and executes it in the background. The download routine sits inside an empty catch block, so a failed attempt produces no error and leaves no trace in the install log. As of early October, both packages remained installable on npm with no advisory flagging either one.
The reason the attack targets the Downloads folder specifically is not arbitrary. Browsers can save files to that directory without asking the user for permission or even requiring a click. Forever built a proof-of-concept web page that silently dropped a crafted `AGENTS.md` into Downloads during a normal browsing session. The firm did not establish that an attacker used this exact method against its customer, but the capability is real and requires no special access.
Test Results Across Two Major Agents
To measure how reliably the technique works, Forever ran controlled tests against OpenAI's Codex and Anthropic's Claude Code.
For Codex, the planted file instructed the agent to register a new server entry in `~/.codex/config.toml` and install the malicious package. Because that config file applies to every session on the machine, a successful write would persist across projects. Codex followed through in more than 90 percent of the test attempts inside an isolated virtual machine.
Claude Code required a different approach. The planted `CLAUDE.md` was written to resemble internal gateway setup documentation, and its goal was to write a custom API endpoint into the project's `.claude/settings.json` file. If an attacker controls that endpoint, every API call from the agent passes through their infrastructure, along with the session token. The token can then be used to take over the account. Claude Code normally prompts the user to approve writes of that kind, and it frequently rejected requests that looked suspicious. The extended engineering-document framing, however, got the write approved roughly half the time.
Neither Vendor Has a Patch
Forever stated plainly that there is nothing for OpenAI or Anthropic to fix. Each agent was doing what it was built to do: read instruction files in the working directory and carry out the steps listed in them. The firm compared the situation to a browser rendering a phishing page. The browser is not broken; the page is malicious.
That framing shifts the responsibility to users and organizations. Forever's own telemetry adds urgency to that point. About half of its customers run a coding agent from their Downloads folder, and roughly a quarter of agent sessions involve an open browser. In many of those cases, no person is actively watching the session when a new file arrives in the directory.
What to Do
The most direct fix is to stop running coding agents from the Downloads folder entirely. Beyond that, Forever recommends reading any `AGENTS.md` or `CLAUDE.md` file you did not write yourself before running a session, including files that arrive in freshly cloned repositories.
For anyone who suspects a file may have already been processed, the firm advises checking `~/.codex/config.toml` for unrecognized server blocks and reviewing `.claude/settings.json` for API endpoints that were not intentionally set. On Windows machines, the presence of `node.exe` inside `%APPDATA%` is a strong indicator that the function-flag payload ran successfully. If a planted file is confirmed, the session's login token should be treated as compromised and rotated immediately.
Keeping approval prompts enabled and running agents inside sandboxes reduces the attack surface, though the Claude Code test results show that approval prompts alone are not a reliable barrier when the malicious instruction is written to look like legitimate documentation.
An operational security slip by affiliates of two ransomware groups left a server exposed long enough for researchers to pull 8,257 AI-generated messages documenting how the operators ran intrusions, negotiated ransoms, and managed their victim pipeline. The logs, recovered from a directory at IP address 45.227.254.43, form one of the most detailed windows into how criminal groups are now deploying artificial intelligence to execute attacks at scale.
The research, published by SOCRadar, links the activity to affiliates of INC ransomware and The Gentlemen, a data extortion group. Analysts assess the operators are Russian-speaking and function both as an intrusion team and as an infrastructure provider, leasing out their toolkit to other ransomware partners.
The Framework Behind the Operation
At the center of the operation sits a custom platform called Phantom, described in its own documentation as an "Autonomous Red Team Kill Chain Framework." The tool ships with 18 skill modules, a routing engine, an autopilot orchestrator, and agents written in Python and Go. It connects to OpenCode, which lets the AI select attack techniques and assign tasks to remote agents. On victim machines, those agents masquerade as Windows Update components and phone home to a domain linked to the operation.
To run the AI components, operators routed prompts through OpenRouter, a commercial model aggregator, using legitimate AI models including Anthropic's claude-opus-4.6 and Moonshot AI's Kimi-K3. When models declined to help with a specific task, operators did not switch tools. They reframed the request as an "Authorized Red Team Assessment Request" and resubmitted it. That workaround appears frequently across the 133 recorded sessions.
Alongside Phantom, the group built WormGPT-MCP, a layer of 32 Model Context Protocol servers that tie the AI to purpose-built tools covering everything from reconnaissance to ransom negotiation. A partner guide found on a second server advertised "55+ tools" and access to more than 9,000 proof-of-concept exploits. The name WormGPT refers to a persona prompt layered over commercial models, not a separate AI system.
For persistence and communication, the group used Ghost C2, a family of three generations of polymorphic implants that route traffic through Cloudflare, Telegram, or DNS to avoid network-level detection.
How They Got In
The operation targeted exposed edge devices and widely used IT management software. Three vulnerabilities drove confirmed access: CVE-2024-57727, a path traversal flaw in SimpleHelp, gave the group admin passwords from 427 servers after scanning nearly 5,000; CVE-2026-35616, an authentication bypass in FortiClient EMS, allowed operators to create backdoor admin accounts across more than 4,000 managed endpoints; and CVE-2026-41940, an authentication bypass in cPanel and WHM, was used to reach small hosting providers and their clients' email servers.
Credential reuse turned single points of access into full-network compromises. In at least one documented case, a single reused password opened the door to a VPN, several servers, a remote management platform, backup infrastructure, and the organization's security management tools. To suppress endpoint detection tools, operators deployed a driver-based EDR killer that abused a vulnerable Zemana driver, a technique known as Bring Your Own Vulnerable Driver.
The Victim Picture
Researchers identified 62 named organizations in the operational logs, with 36 located in the United States. Industrial, manufacturing, and energy firms made up the largest share of targets at roughly 16 percent. Healthcare and pharmaceuticals came in second at about 14.5 percent. Most targeted companies were smaller businesses, with 27 of 35 classifiable organizations reporting revenue below $250 million. Some were reached indirectly through a managed service provider whose admin credentials had been stolen.
Four organizations ended up listed on public leak sites. The operation's timeline runs from mid-July 2026 through a live encryption event on September 30, 2026.
Extortion by the Numbers
The playbook prioritized data theft over encryption. Operators sifted through stolen financial records to gauge what a victim could pay, then opened contact with a text-only email carrying no ransom figure. Pressure escalated through scripted vishing calls, threats to notify customers and regulators, and hard deadlines of 24 to 72 hours before publication. Payment was planned in Monero, though researchers found no wallet or confirmed transaction records.
Demand figures from recovered case files show the range of the operation. A EUR 15 million demand sent to a company called Aidon was later revised down to EUR 4 million after the operators realized they had compromised the wrong parent company. A healthcare network in Australia received demands between AUD 3 million and AUD 8 million. The Gentlemen's communications to Leo Schachter Diamonds included a four-message sequence and a vishing plan. For Trulite Glass and Aluminum, the group set up a look-alike domain, trulitesupport[.]com, to warn the company's own customers about the breach.
Total spending on the operation's infrastructure is estimated at just under $24,000.
By exploiting stolen authentication tokens instead of passwords, a cyber campaign targeting Microsoft 365 compromised email accounts for 79 organizations. During the period July 14-22, 2026, cybersecurity firm Huntress reported unauthorized access to business accounts was gained by replaying stolen login sessions for ten weeks, using stolen login sessions.
Research indicated that there were approximately 497 successful login attempts during the investigation, compared to more than 200,000 failed login attempts. The campaign relied on infrastructure provided by 1337 Services GmbH, a hosting provider based in Hamburg, Germany. Microsoft Entra ID Protection also flagged several IP addresses associated with the activity, indicating that portions of the infrastructure had been identified as suspect. This attack highlights the vulnerability of conventional account protection.
Although multi-factor authentication (MFA) was enabled during legitimate sign-ins, attackers exploited this mechanism to capture authentication tokens after the user completed the verification process. As a result of these tokens, Microsoft 365 services could be accessed without the attacker having to enter the account password or repeat the MFA challenge.
Stolen Authentication Tokens Bypass MFA Protection
There have been several techniques employed by researchers to obtain valid authentication tokens, including adversary in the middle (AiTM) phishing, device-code phishing, and social engineering. In AiTM attacks, victims are directed to fraudulent sign-in pages that relay requests to Microsoft's genuine login service.
Once the user enters their credentials and completes MFA, the relay captures the session token resulting from that action. Having successfully authenticated a user, the token can be reused by an attacker without requiring the user to complete the original verification process again. Another method is device-code phishing, which tricked the victim into entering a code on Microsoft's valid sign-in page, enabling the attacker to control the session without being aware.
According to Huntertress, token spray is an approach to attempting access at scale by reusing stolen tokens across multiple organizations in a similar manner to password spraying. In place of repeatedly guessing passwords, attackers used already authenticated sessions to attempt access to multiple organizations.
The stolen sessions were often used within minutes of being stolen. During one incident on July 21, the attacker accessed a hijacked session 12 minutes after the victim reached the MFA prompt. During another incident on September 22, the interval was only four minutes. The campaign also involved repeated changes to its infrastructure.
Attackers rotated between six IP addresses within the range 193.26.115.0/24, returning in multiple waves separated by periods of inactivity, rotating between the six IP addresses in succession. Using this approach, it was difficult to block specific addresses since activity could continue from another address in the same range.
After gaining initial access, attackers attempted to maintain control over compromised accounts and conceal suspicious activity, increasing the risk that further business email compromises will occur.
Attackers Compromise 79 Organizations Through Microsoft 365 Token Replay
A number of methods were also used to maintain access after the initial compromise by Huntress, including identifying 48 unauthorized devices registered in the Microsoft Entra directories of victims. The attackers were able to retain access even after stolen sessions expired by removing existing multi-factor authentication (MFA) methods and registering new ones within three hours of the first suspicious sign-in in 19 organizations.
A password reset alone will not remove these unauthorized devices or authentication methods, leaving compromised accounts exposed unless administrators review and remove them. However, they can create their own authenticator methods to complete future login verification. As well as creating concealed inbox rules for hiding messages from account owners, attackers also created concealed inbox rules.
A number of rules automatically marked incoming emails as read, deleted them, or moved them into folders such as RSS Feeds and Conversation History. These rules typically contained short names or punctuation, which rendered them less visible during routine checks. An external accountant was contacted by an e-mail relating to payroll related issues using a compromised mailbox.
Using the attacker's rule, he was able to capture messages containing terms such as "payroll," "direct deposit," "bank," and "bonus," and then added another rule to hide the accountant's responses. As a result of this approach, fraudulent payment requests may continue, without the account owner being aware of the conversation.
Attack Infrastructure Shifted Across Multiple Phases Over the course of four phases from July 14 to September 22, 2026, Hunters tracked the operation. In order to capture and replay sign-in tokens, the attackers rotated between six IP addresses associated with German hosting provider 1337 Services GmbH, using separate infrastructure.
In addition to 497 successful sign-ins across 79 organizations, over 200,000 unsuccessful attempts were recorded as part of the investigation. The Microsoft Entra ID Protection system flagged several addresses associated with the activity during a four-day burst in September. One address recorded hundreds of successful sign-ins from dozens of organizations. The campaign utilized scripted token replays as well as browser-based session replays.
A device-code phishing scheme, which involves tricking users into entering a code on Microsoft's legitimate sign-in page, was also employed in the campaign, enabling hackers to authorize sessions without obtaining account credentials. Huntress did not attribute the campaign to a specific threat group or country.
The findings emphasize instead how stolen session tokens can compromise account security even with multi-factor authentication enabled. Conditional Access Policies Can Help Limit Exposure Using Conditional Access policies, Hunters recommends requiring multi-factor authentication (MFA) or blocking access to all users, cloud applications, and client applications. These policies were able to stop more than a thousand sign-in attempts from a single attacker-controlled address across four organizations during the observed campaign, demonstrating their effectiveness when properly configured.
When a token replay incident is suspected, administrators need to revoke active sessions, reset passwords, and audit Entra devices and MFA methods registered with the network. Checkbox rules for unusual names, unexpected message deletions, and rules that redirect payroll or banking correspondence to avoid unusual names.
Additionally, organizations should review suspicious sign-ins and restrict device-code authentication in situations where it is not necessary. According to the campaign, addressing token theft involves more than simply changing passwords.
In order to prevent attackers from returning to compromised Microsoft 365 accounts, it is also necessary to remove unauthorized authentication methods, invalidate sessions, and identify concealed mailbox activity.
Tokyo – Park24, which operates Times Car through its subsidiary Times Mobility, confirmed late October that attackers had accessed personal data belonging to more than 6.6 million current and former members of Japan's largest car-sharing service. The final investigation report, released October 23, puts the incident among the most serious personal data exposures Japan has seen in recent years, with identity documents at the center of the damage.
The stolen data covers names, home addresses, dates of birth, phone numbers, email addresses, and driver's license details for 6,628,007 accounts. For 1,464,800 of those accounts, attackers transmitted encrypted images of identity documents outside the company's systems. Those images included driver's licenses, utility bills used to verify home addresses, student IDs from people enrolled in student plans, and family verification documents for members on family plans. Another 891,602 account holders had their images accessed but not transmitted. In total, roughly 2.36 million identity document files were touched in some form.
Attackers entered through a vulnerability in the Times Car web application and used what they found there to navigate into the company's underlying database and file storage. Park24 has not named the specific flaw or described the compromised architecture, saying only that the confirmed access path is closed and that systems built the same way were reviewed afterward. The breach was detected at 9:07 a.m. on September 25. By the following morning, the attacker's communication route was cut off.
Times Mobility's Times Club loyalty program was accessed in the same incident. That system contributed 135,436 linked service IDs, 19,510 Times Club card numbers, and the last four digits of 28 credit cards to the exposure. Park24 said it does not store full card numbers or security codes in either system. Four hashed passwords were also transmitted, though the company described them as stored "in a form that cannot be restored."
The financial toll has been significant. Park24 projected a 5.5 billion yen special loss and cut its full-year net profit forecast by 12.5 percent. The company plans to pay 3,000 yen per person, in cash or vouchers, to each of the 1.46 million customers whose encrypted ID images left the system. Daily sales have since returned to pre-incident levels, though the company acknowledged that membership numbers dropped in the immediate aftermath of the disclosure.
A Japanese attorney opened a plaintiff intake site on September 30, and by October 7, roughly 64,000 people had registered as potential claimants. No lawsuit has been filed yet, but the figure is unusually high by the standards of Japan's data-privacy litigation history.
Regulators moved across several agencies. The National Police Agency issued guidance on October 8, warning businesses to tighten identity verification and alerting the public to impersonation scams. The Financial Services Agency followed the next day, asking banks and financial firms to stop accepting uploaded ID photos for account verification ahead of the April 2027 legal deadline and to read IC chips from physical documents instead. Japan's transport ministry instructed the Japan Rental Car Association to survey its members on data protection practices and report back by October 30.
"A reissue is not something that lets you feel safe." [Police official, quoted by Asahi Shimbun, on driver's license replacement]
One consequence without much precedent in Japanese data-protection cases has been a wave of driver's license reissue requests. Because license numbers and photographs are permanent identifiers, prefectural public safety commissions began accepting applications for replacements under the Road Traffic Act. By October 10, at least 16 prefectures, including Aichi, Hiroshima, Miyagi, and Niigata, were processing applications. A reissued license carries a new number and photograph but does not change the holder's name, address, or date of birth, which limits how much protection it actually offers.
Times Mobility changed its retention practices on October 16, announcing it would delete ID images once a registration check is complete for current members and would no longer keep images of former members at all, reversing a policy of retaining them for seven years. The company had cited identity verification needs and the Corporation Tax Act as justification for the extended retention, though tax law does not require keeping license images. All existing images are scheduled for deletion by the end of October.
Times Mobility has held Japan's Privacy Mark certification from JIPDEC since 2021, valid through August 2027. JIPDEC received the incident report and asked for a prompt investigation; its options include issuing a recommendation, suspending the mark, or revoking it.
The breach arrived during a period of rising unauthorized access across Japan. The National Police Agency recorded more than 7,190 such cases in 2025, more than four times the 2021 figure. Nippon Rent-A-Car disclosed a separate intrusion the same week affecting 96 members across two access events, though neither company has suggested any connection between the incidents.
Anyone who ever registered with Times Car, including those who never finished sign-up, should treat their information as having been accessed. The company has said it will never request passwords, SMS codes, or card PINs by phone or message. Its official fraud hotline is 0120-25-8924.