A sophisticated China-linked botnet has been targeting Microsoft Azure environments using covert password spraying techniques, exploiting legacy authentication protocols to bypass security measures. Cybersecurity researchers have identified the threat actor as "CovertNetwork-1658", operating the "Botnet-7777" infrastructure to launch large-scale attacks against cloud-based Microsoft 365 and Azure services.

The Attack Methodology

The botnet employs password spraying—a brute-force technique where attackers try common passwords across multiple accounts—to avoid detection. Unlike traditional brute-force attacks that target a single account with many passwords, password spraying spreads attempts across many accounts, making it harder to trigger lockout policies.

  • Targets: Microsoft Azure AD, Office 365, and hybrid environments
  • Exploited Protocols: Legacy authentication (Basic Auth, IMAP, POP3)
  • Attack Volume: Thousands of attempts per hour, distributed globally

Why Legacy Authentication is the Weak Link

Microsoft has been urging customers to disable Basic Authentication (Basic Auth) since 2021 due to its vulnerabilities. However, many organizations still rely on legacy systems that require these outdated protocols, leaving them exposed:

1. **No MFA Support**: Basic Auth cannot enforce multi-factor authentication (MFA).
2. **Limited Logging**: Legacy protocols generate fewer security logs, reducing visibility.
3. **Protocol Vulnerabilities**: IMAP/POP3 are prone to credential theft via man-in-the-middle attacks.

How Botnet-7777 Evades Detection

The botnet uses IP rotation and geographically distributed proxies to mimic legitimate traffic. Researchers note that it:

  • Cycles through 1,000+ IP addresses per attack wave
  • Masquerades as user agents from browsers and mobile devices
  • Leverages Tor exit nodes and cloud hosting providers

Microsoft's Response and Mitigation Steps

Microsoft has released updated guidance for Azure AD customers:

Recommended Defenses:

  1. Disable Basic Auth: Enforce Modern Authentication (OAuth 2.0).
  2. Enable MFA: Mandate multi-factor authentication for all users.
  3. Monitor Sign-In Logs: Use Azure AD’s Risky Sign-Ins report.
  4. Block Legacy Protocols: Restrict IMAP/POP3/SMTP where possible.
  5. Deploy Conditional Access: Geo-blocking and device compliance policies.

The Bigger Picture: China's Cyber Threat Landscape

This campaign aligns with China’s broader cyber-espionage tactics, which often target cloud infrastructure for data exfiltration. Recent reports from Mandiant and CrowdStrike attribute similar attacks to APT41 and HAFNIUM—groups linked to China’s Ministry of State Security (MSS).

Key Takeaways for Enterprises

  • Cloud ≠ Secure by Default: Azure requires proactive hardening.
  • Password Spraying is Rising: Account for it in threat models.
  • Legacy Tech = Risk: Prioritize phasing out Basic Auth.

Organizations using Microsoft Azure should treat this as a critical reminder to audit their authentication frameworks before attackers exploit lingering weaknesses.