It has been recently reported that a Chinese group of Advanced Persistent Threats (APTs) has carried out a sophisticated cyberespionage operation dubbed "Operation Digital Eye" against the United States.  Between the end of June and the middle of July 2030, a campaign targeting large business-to-business (B2B) IT service providers in southern Europe between late June and mid-July 2024 was reported by Aleksandar Milenkoski, Senior Threat Researcher at SentinelLabs, and Luigi Martire, Senior Malware Analyst at Tinexta Cyber. 

Several threats are targeting business-to-business IT service providers in southern Europe, according to Tinexta Cyber and SentinelLabs, both of which have been tracking these activities. As a result of assessing the malware, infrastructure, techniques used, victimology, and timing of the activities, it has been concluded that there is a high likelihood that a cyberespionage actor of the China nexus conducted these attacks. 

A group of Chinese hackers has been observed utilizing Visual Studio Code (VSCode) tunnels to maintain persistent remote access to compromised systems at large IT service providers in Southern Europe. There is no information regarding which hacker group aligned with China is behind the attacks at this time, which is complicated by the fact that many of those aligned with the East Asian nation share a multitude of toolsets and infrastructure. 

VS Code is the latest version of Microsoft's code editor that is optimized for building and debugging modern web and cloud applications that utilize modern web technologies. VS Code is a lightweight but feature-rich source code editor that runs on your desktop and is available for Windows, Mac OS X, and Linux clients. It is available on most major platforms. In addition to these built-in support technologies, it also comes with a rich ecosystem of extensions that can be used with other languages and runtimes, including JavaScript, TypeScript, and Node.js. According to companies, most breaching chains that firms observe entail using SQL injections as a first point of access for breaching systems connected to the internet, such as web applications and databases. 

To inject code into the target computer, a legitimate penetration testing tool called SQLmap was used. This tool made it possible to detect and exploit SQL injection flaws automatically. Following gaining access to the system, PHPsert was deployed, which was a PHP-based web shell that would allow them to execute commands remotely or to introduce additional payloads once they fully established access. To move laterally, the attackers used RDP and pass-the-hash attacks to migrate from one target to another, specifically using a custom version of Mimikatz ('bK2o.exe') in addition to RDP. 

Using the 'WINSW' tool, the hackers installed a portable, legitimate version of Visual Studio Code on the compromised computers ('code.exe') and set it up as a persistent Windows service to make sure it would run on every device. VSCode was configured with the tunnel parameter, enabling remote development access on the machine, and then the tunnel parameter was configured to be enabled by default. Visual Studio Code tunnels are a feature of Microsoft's Remote Development feature. 

This feature allows VSCode developers to select files on remote systems for editing and working via Visual Studio Code's remote servers. As a powerful development tool, RemoteDeveloper allows developers to run commands and access the file systems of remote devices, which makes it a viable option for developers. With the use of Microsoft Azure infrastructure for the tunnel creation and the signing of executables, trustworthy access to the network can be assured. 

"Operation Digital Eye" illustrates the concept of lateral movement using techniques linked to a single vendor or a "digital quartermaster" operating within the Chinese APT ecosystem in the form of lateral movement. During the study, the researchers discovered that the attackers used Visual Studio Code and Microsoft Azure for command-and-control (C2) to evade detection, which they considered to be a matter of good judgment. 

There has never been an observation of a suspected Chinese APT group using Visual Studio Code for C2 operations before, signalling a significant change in what China is doing about APTs. According to recent research conducted by Unit 42, it has been discovered that Stately Taurus has been abusing popular web development software Visual Studio Code in its espionage operations targeting government organizations in Southeast Asia. Defending the Chinese government from attacks by Stately Taurus, a group of advanced persistent threats (APTs) involved in cyber espionage. It seems that this threat actor relied on Microsoft's Visual Studio Code embedded reverse shell feature to gain an entry point into the target network. 

An expert in the field of security discovered this technique as recently as 2023, which is relatively new. Even though European countries and China have complex ties, there is also a great deal of cooperation, competition, and undercurrent tension in areas like trade, investment, and technology, due to the complex relationships between them. China-linked cyber espionage groups target public and private organizations across Europe sporadically to gather strategic intelligence, gain competitive advantages, as well as advance the geopolitical, economic, and technological interests of China. 

In the summer of 2024, a coordinated attack campaign dubbed Operation Digital Eye was carried out by Russian intelligence services, lasting approximately three weeks from late June to mid-July 2024. As a result of the targeted organizations' capabilities to manage data, infrastructure, and cybersecurity for a wide range of clients across various industries, they are prime targets for cyberespionage activities.

As part of Operation Digital Eye, researchers highlight how Chinese cyberespionage groups continue to pose an ongoing threat to European entities, with these actors continuing to use high-value targets as targets of espionage. Even though the campaign emphasizes the strategic nature of this threat, it is important to realize that when attackers breach organizations that provide data, infrastructure, and cybersecurity services to other industries, they gain access to the digital supply chain, allowing them to extend their influence to downstream companies. 

This exploit relies on SSH and Visual Studio Code Remote Tunnels, which were used by the attackers to execute remote commands on their compromised endpoints by using their GitHub accounts as authentication credentials and connections. By using the browser-based version of Visual Studio Code ("vscode[.]dev"), they were able to access the compromised endpoints. Despite this, it remains unclear whether the threat actors used freshly created GitHub accounts to authenticate their access to the tunnels or if they had already compromised GitHub accounts. 

In addition to mimicking, several other aspects point to a Chinese presence, including the presence of simplified Chinese comments within PHPsert, the fact that M247 provides the infrastructure for this server, and the fact that Visual Studio Code is being used as a backdoor, the last of which has been attributed to the actor who portrayed Mustang Panda. The investigation uncovered that the threat actors associated with Operation Digital Eye demonstrated a notable pattern of activity within the networks of targeted organizations. 

Their operations were predominantly aligned with conventional working hours in China, spanning from 9 a.m. to 9 p.m. CST. This consistent timing hints at a structured and deliberate approach, likely coordinated with broader operational schedules. One of the standout features of this campaign was the observed lateral movement within compromised environments. This capability was traced back to custom modifications of Mimikatz, a tool that has been leveraged in earlier cyberespionage activities. 

These tailored adjustments suggest the potential involvement of centralized entities, often referred to as digital quartermasters or shared vendors, within the ecosystem of Chinese Advanced Persistent Threats (APTs). These centralized facilitators play a pivotal role in sustaining and enhancing the effectiveness of cyberespionage campaigns. 

By providing a steady stream of updated tools and refined tactics, they ensure threat actors remain adaptable and ready to exploit vulnerabilities in new targets. Their involvement underscores the strategic sophistication and collaborative infrastructure underlying such operations, highlighting the continuous evolution of capabilities aimed at achieving espionage objectives.