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Yahoo admits to having knowledge of massive breach in 2014, might sour $4.8 Bn Verizon deal

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As one would’ve expected, Yahoo’s worst nightmares are now possibly turning to reality. Ever since the announcement of the $4.8 billion acquisition of the company’s core business assets by Verizon in July, Yahoo has been accused of multiple wrong-doings. A couple months post the acquisition news, Yahoo confirmed that its servers had been breached by state-sponsored hackers who were able to gain access to over 500 million user accounts. This was followed by accusations that the company had obliged to a request from U.S intelligence officers to monitor all of its e-mail accounts.

And now, Yahoo is burying itself in even deeper troubles with the revelation that some of the company personnel were aware of the massive 2014 account breach. This regulatory filing with the U.S Securities and Exchange Commission was first spotted by Financial Times who notes that Yahoo is currently working with forensic investigators to evaluate whether state-sponsored hackers have access to its account data or not.

The SEC report filed by Yahoo on Wednesday reports:

The Company had identified that a state-sponsored actor had access to the Company’s network in late 2014.

An Independent Committee of the Board, advised by independent counsel and a forensic expert, is investigating, among other things, the scope of knowledge within the Company in 2014 and thereafter regarding this access, the Security Incident, the extent to which certain users’ account information had been accessed, the Company’s security measures, and related incidents and issues.

Sources familiar with the investigation process suggests that some of the employees may not have been surprised to learn about a breach in their server – common for a company this large!? – but they’re now amazed to learn about the extent of the network breach. Once the hack was made public and the investigation gained attraction(and pace), then only did Yahoo realize the massive nature of the attack.

In the regulatory filing, the company also mentioned that forensic investigators are now closely looking at the possibility of the state-sponsored hackers maintaining access to user accounts. They believe that the intruders managed to create cookies that enabled them to bypass certain user accounts without the need of any password. In addition, Yahoo has also noted that ‘law enforcement authorities began sharing certain data that they indicated was provided by a hacker who claimed the information was Yahoo user account data.’ Thus, it is also taking up the task to identify and corroborate(or deny!) the same in the near future.

Verizon Deal in Jeopardy

In addition to the action plan to recognize the damages caused by the massive network breach in 2014, Yahoo is also facing 23 class-action lawsuits which have been filed by users who claim to have been affected by the attack. They’re also rebuking the negligent behavior of the company, which failed to confirm the massive breach at the time it had actually occurred.

Also in the regulatory filing, Yahoo has for the first time revealed its fears and the possibility of the $4.8 billion acquisition agreement with telecom giant Verizon falling through. Verizon is already spooked with the material effects of the massive breach and has reportedly also asked the company’s team for a billion dollar rebate of the sale amount. But, the company has today devoted a separate ‘risk factors’ section to detail the uncertainties surrounding the impending deal.

In the quarterly earnings SEC filing, the company has listed the worst-case scenario related to its acquisition by Verizon and its pretty bad. The statement states that,

[the] risks that Verizon may assert, or threaten to assert, rights or claims with respect to the Stock Purchase Agreement as a result of facts relating to the Security Incident and may seek to terminate the Stock Purchase Agreement or renegotiate the terms of the Sale transaction on that basis.

In a way, this statement mentioned in the regulatory filing means that Yahoo is aware of the possible material effects that Verizon may be worried about but it doesn’t mean that Yahoo will give up(or re-negotiate) with Verizon directly. The company will try to push for original terms of the deal but all the hubbub surrounding its position in the technology space might certainly affect it.

A hands-on guy fascinated by new apps, technologies and enterprise products.

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