Yahoo execs botched its response to 2014 breach, investigation finds

Yahoo's security team knew an intrusion had occurred in 2014, but the company failed to properly investigate, an internal committee has found

If your company has experienced a data breach, it's probably a good idea to thoroughly investigate it promptly.

Unfortunately, Yahoo didn't, according to a new internal investigation. The internet pioneer, which reported a massive data breach involving 500 million user accounts in September, actually knew an intrusion had occurred back in 2014, but allegedly botched its response.

The findings were made in a Yahoo securities exchange filing on Wednesday that offered more details about the 2014 breach, which the company has blamed on a state-sponsored hacker.

That breach, which only became public last year, involved the theft of user account details such as email addresses, telephone numbers, and hashed passwords. After Yahoo went public with it, the company established an independent committee to investigate the matter.

The committee found that Yahoo’s security team and senior executives actually knew that a state-sponsored actor had hacked certain user accounts back in 2014, according to the filing.

But even as the company took some remedial actions, such as notifying 26 users targeted in the hack and adding new security features, some senior executives allegedly failed to comprehend or investigate the incident further.

For instance, in December 2014, Yahoo's security team knew the state-sponsored actor had stolen copies of backup files that contained users' personal data. But it's unclear whether this information was ever "effectively communicated and understood" outside the security team, Wednesday's filing said.

No intentional suppression of information was found, although Yahoo's legal team had enough reason to investigate the breaches further, the committee concluded. But still, they didn't.

"As a result, the 2014 security Incident was not properly investigated and analyzed at the time," the filing said.

It was only about two years later when Yahoo publicly disclosed the breach. That came after a stolen database from the company allegedly went up for sale on the black market.

However, after Yahoo disclosed the breach, a few months later, the company learned of an even bigger hack that involved 1 billion Yahoo user accounts and further rocked the company's reputation.

That breach originally occurred in August 2013 but wasn’t noticed until law enforcement provided Yahoo with a copy of the stolen data last November.

According to Wednesday's filing, Yahoo still hasn’t learned how this data was stolen, although it appears to be separate from the 2014 breach.

In addition, the company has been investigating an another incident involving a hacker forging cookies as a way to break into user accounts. Wednesday's filing said that about 32 million user accounts were affected.

"We believe that some of this activity is connected to the same state-sponsored actor believed to be responsible for the 2014 security Incident," Yahoo said.

To protect users, the company has forced password resets and invalidated the forged cookies.

Nevertheless, after the hacking incidents, Yahoo agreed to take off US$350 million from Verizon Communications' original offer to buy the internet company. The deal is expected to close this second quarter.

Because of the breaches, Yahoo said the company is facing about 43 class action lawsuits.

In a separate post, Yahoo CEO Marissa Mayer said she'll forgo taking her annual bonus because the 2014 breach happened on her watch.

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