Sophos Managed Detection and Response (MDR) has uncovered a sophisticated, long-running cyberespionage campaign dubbed “Crimson Palace,” attributed to Chinese state-sponsored actors.
The operation targeted a high-profile government organization in Southeast Asia, with activities spanning from early 2022 to April 2024.
Discovery and Investigation
The investigation began in May 2023, following the detection of a DLL sideloading technique exploiting VMNat.exe, a VMware component.
Sophos MDR’s Mark Parsons led the threat hunt, which revealed three distinct clusters of intrusion activity: Cluster Alpha (STAC1248), Cluster Bravo (STAC1807), and Cluster Charlie (STAC1305).
Novel Malware Variants
Sophos identified several previously unreported malware variants, including CCoreDoor, PocoProxy, and an updated version of EAGERBEE.
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These variants exhibited advanced capabilities, such as blackholing communications to anti-virus vendor domains and deploying various command-and-control (C2) communications.
The campaign involved over 15 DLL sideloading scenarios, abusing Windows Services, legitimate Microsoft binaries, and anti-virus software.
This technique enabled attackers to evade detection and maintain persistent access to the target network.
The threat actors employed numerous evasion techniques, including overwriting DLLs in memory to unhook the Sophos AV agent process from the kernel and using various methods to test the most efficient ways of executing their payloads.
Analysis of Activity Clusters
Cluster Alpha (STAC1248)
Active from March to August 2023, Cluster Alpha focused on deploying multiple malware variants and establishing persistent C2 channels.
The actors used unique techniques to disable AV protections, escalate privileges, and conduct surveillance on Active Directory infrastructure.
Cluster Bravo (STAC1807)
Cluster Bravo’s activity was concentrated over three weeks in March 2023, coinciding with the first session of China’s 14th National People’s Congress.
The actors used valid accounts to spread laterally, deploying the CCoreDoor backdoor to establish C2 communications and maintain persistence on target servers.
Cluster Charlie (STAC1305)
Cluster Charlie was active from March 2023 to April 2024, prioritizing access management and deploying the PocoProxy malware for persistent C2 communications.
The actors conducted extensive surveillance and exfiltrated sensitive information, including military and political documents.
Attribution and Cluster Overlap
Sophos asserts confidently that the observed activity clusters are associated with Chinese state-sponsored operations.
The clusters exhibited distinct behavior patterns but showed overlaps in compromised infrastructure and objectives, suggesting some coordination.
Sophos MDR continues to monitor the targeted environment, sharing intelligence with government and industry partners, including Elastic Security and Trend Micro.
The investigation highlights the importance of proactive threat hunting and an efficient intelligence cycle in identifying and mitigating cyber threats.
The “Crimson Palace” campaign underscores the persistent threat posed by state-sponsored cyberespionage.
Sophos’ findings contribute to the broader understanding of Chinese cyber operations and provide valuable insights for defenders and analysts working to disrupt similar activities.
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