Latest cybersecurity reporting from selected sources.

Also, HexDex Arrest, Black Axe Crackdown, LeRobot RCE FlawThis week, election threats resurfaced. A prolific hacker arrested. Black Axe network disrupted. China-linked disinformation targets Tibet. Exploited ScreenConnect and Windows flaws raise alarms. Minecraft gamers hit with stealer malware. A critical AI framework bug enables remote code execution.

Cybersecurity researchers have discovered two malicious Microsoft Visual Studio Code (VS Code) extensions that are advertised as artificial intelligence (AI)-powered coding assistants, but also harbor covert functionality to siphon developer data to China-based servers

Two malicious extensions in Microsoft's Visual Studio Code (VSCode) Marketplace that were collectively installed 1.5 million times, exfiltrate developer data to China-based servers. [...]

Microsoft has begun rolling out the beta version of its AI-powered Gaming Copilot to Windows 11 systems for users aged 18 or older, excluding those in mainland China. [...]

Also, Colt Services Outage Persists, Finland Charges Americans in Vastaamo HackThis week, Microsoft hit RaccoonO365, Colt Technology Services, Finland charged a U.S. citizen in Vastaamo hack. RevengeHotels hackers used AI, Meta can't overturn a privacy case verdict. Chinese hackers unleashed spear phishing emails. Prosper confirmed a data breach, as did Kering fashion houses.

Also: Software Supply Chain Risks, Cato's AI Security BuyIn this week's update, four ISMG editors discussed the Pentagon's review of Microsoft's use of Chinese nationals on U.S. military cloud systems, renewed concerns over software supply chain risks and Cato Networks' first-ever acquisition to boost AI security.

Microsoft Sees Cyberespionage Group Lifting API Keys and Credentials for CustomersA prolific cyberespionage group tied to Beijing appears to have increased its targeting of widely used IT tools and service providers. Microsoft said the group's tactics now include stealing API keys and credentials from providers to gain access to providers' downstream customers' infrastructure.

They're good at zero-day exploits, too Silk Typhoon, the Chinese government crew believed to be behind the December US Treasury intrusions, has been abusing stolen API keys and cloud credentials in ongoing attacks targeting IT companies and state and local government agencies since late 2024, according to Microsoft Threat Intelligence.…

Researchers uncovered flaws in large language models developed by Chinese artificial intelligence company DeepSeek, including in its flagship R1 reasoning application. The security concerns come as Microsoft and OpenAI investigate whether DeepSeek developed used data scraped from an OpenAI API.

OpenAI and Microsoft Reportedly Investigate DeepSeek API AccessThe low-cost miracle of the DeepSeek-R1 model may not in fact be one as accusations surfaced that the Chinese company may have derived its reasoning model from U.S. firm OpenAI. OpenAI and Microsoft are investigating whether DeepSeek stole information from OpenAI through an API.

Also: Africa Busts Cybercrime Suspects; Many Smart Devices Lack Update TransparencyThis week, Microsoft previews its latest attempt to introduce AI-enabled Windows Recall - now with added privacy features; over 1,000 cybercrime suspects busted in Africa; regulators report "smart" device update promises often missing; and Florida IT professional caught spying for China.

The US government worries that Group 42 Holdings, an AI firm based in the United Arab Emirates, could become a backdoor for technology leaks to China.

We recently discovered a new threat actor group that we dubbed Void Arachne. This group targets Chinese-speaking users with malicious Windows Installer (MSI) files in a recent campaign. These MSI files contain legitimate software installer files for AI software and other popular software but are bundled with malicious Winos payloads.

Chance of AI-Generated Content Affecting Results Appears to Remain Low - for NowChina-backed attackers are continuing to refine their use of content generated using artificial intelligence tools, including audio deepfakes and video news anchors, to sow disruption and influence elections in the U.S., Taiwan, India and beyond, security researchers at Microsoft warn.

A Microsoft report found that China-affiliated actors are publishing AI-generated content on social media to amplify controversial domestic issues in the US

Hackers Used LLMs to Perform Tasks That Non-AI Tools Can PerformNation-state hackers including Russian military intelligence and hackers backed by China have used OpenAI large language models for research and to craft phishing emails, the artificial intelligence company disclosed Tuesday in conjunction with major financial backer Microsoft.

Nation-state actors associated with Russia, North Korea, Iran, and China are experimenting with artificial intelligence (AI) and large language models (LLMs) to complement their ongoing cyber attack operations

The findings come from a new report released by Microsoft Threat Analysis Center on Thursday

Sometimes using AI to make hilariously wrong images that still drive social media engagement Microsoft, which earlier this week admitted not being able to detect a Chinese attack on its own infrastructure, has published a report [PDF] titled "Digital threats from East Asia increase in breadth and effectiveness." In the report, Redmond's Threat Intelligence group expounds on its fresh insight into evolving online aggressions from both China and North Korea.…

PLUS: India calls for global action on AI and crypto; Vietnam seeks cybersecurity independence; China bans AI prescribing drugs Asia In Brief Taiwan-based infosec consultancy Team T5 has disputed Microsoft's alleged timeline of just when a Beijing-linked attack group named Flax Typhoon commenced its campaigns.…