Yahoo Triples Likely Scope of 2013 Hack to 3 Billion Users

(Bloomberg) -- Yahoo, the internet company acquired by Verizon Communications Inc. this year, now believes a 2013 security breach exposed all 3 billion of its users at the time.

An assessment based on intelligence obtained after the $4.5 billion acquisition showed the number of accounts compromised was far higher than Yahoo's initial estimate of 1 billion. The information stolen didn't include passwords in clear text, payment data or bank accounts. Yahoo is notifying users.

Verizon, which is combining Yahoo with its AOL business to attract more internet advertising, had negotiated a $350 million price cut on the deal after Yahoo disclosed the 2013 breach and a subsequent hack in 2014. Verizon and Altaba Inc., the former owner of the Yahoo Internet assets Verizon acquired, agreed earlier this year to split evenly the liability costs of lawsuits related to the breach. Altaba also has to cover any shareholder costs.

While the attacks exposed user accounts and threatened Yahoo's trust with consumers, most people have already moved on, said Jan Dawson, an analyst at Jackdaw Capital.

“Certainly this makes the hack look worse than Verizon and the rest of us thought, but I don't know that that materially changes the valuation of Yahoo as a company or the ongoing cost of dealing with the hack,” Dawson said.

Verizon, based in New York, fell 0.2 percent to $49.78 at 11:50 a.m. in New York. New York-based Altaba was up 0.4 percent to $68.06.

The Senate Commerce Committee will call on Yahoo representatives to testify about the breaches, whether there are steps they should have taken earlier and whether there is more bad news to come, John Thune, the panel's chairman, said Tuesday in a statement. The committee is also calling representatives of Equifax Inc., the consumer credit agency involved in a breach that compromised information on 145.5 million U.S. consumers. The date and witness list will be announced later this month.

Russian Involvement

Yahoo has said it wasn't able to identify who was responsible for the 2013 breach, though the U.S. government has accused Russia of directing the 2014 hack. The 2013 intrusion was discovered by Andrew Komarov, chief intelligence officer for InfoArmor, who had been tracking a Eastern European hacker group that he spotted offering 1 billion Yahoo accounts for $300,000 in a private sale.

By watching the group's communications, he was able to determine that it sold the database three times. Two buyers were large spamming groups. The third purchaser provided a list of 10 names of U.S. and foreign government officials and business executives to verify that their logins were part of the database, Komarov said. The unusual request, Komarov said, indicated that the buyer might be linked to a foreign intelligence agency.

Yahoo's sites, like email, finance, Flickr, Tumblr and sports have faded in popularity since 2013. Oath, Verizon's media group that includes Yahoo, reaches about 1 billion consumers, said Chief Executive Officer Tim Armstrong in an interview last month.

--With assistance from Brian Womack

To contact the reporter on this story: Scott Moritz in New York at smoritz6@bloomberg.net.

To contact the editors responsible for this story: Crayton Harrison at tharrison5@bloomberg.net, Bruce Rule, Jessica Brice