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Target Could Be Liable for $3.6 Billion from Security Breach

By - Source: SuperMoney | B 41 comments

This is just the beginning.

Target said on Friday that it is actively partnering with the United States Secret Service and the Department of Justice on the ongoing investigation into the malware that affected Target’s point-of-sale system in U.S. stores. The company can’t say anything further, as the Secret Service wants the details of the forensics and investigation under wraps.

"We take this crime seriously. It was a crime against Target, our team members, and most importantly, our guests. We’re in this together," said CEO Gregg Steinhafel days ago. "We recognize this issue has been confusing and disruptive during an already busy holiday season. We want to emphasize that the issue has been addressed and let guests know they can shop with confidence at their local Target stores."

According to SuperMoney, Target may be facing a fine of $90 for each cardholder’s compromised data, equaling a hefty if not scary $3.6 billion USD liability. That’s in addition to civil litigations, fines from banks and credit card institutions, the cost of re-fortifying its network and related security evaluations, and more.

TechCrunch explains that the $90 fine stems from the PCI Council, which was formed in 2006 by Visa, American Express, JCB, Discover and MasterCard. This group oversees the new Payment Card Industry Data Security Standard, or PCI SDD. This standard defines how organizations manage cardholder information. If retailers are found violating the standard, they’re fined $50 to $90 per cardholder data compromised.

On Thursday Target confirmed that hackers managed to access its computers and stole the credit and debit information of around 40 million customers who shopped at Target, which has nearly 1,800 stores nationwide, between November 27 and December 15. The thieves retrieved customer names, credit card numbers and expiration dates.

As of Friday, two separate class action lawsuits were filed in U.S. District Court in Minnesota, filed on behalf of three Target customers who claim they’re suing for all affected customers. They are accusing the company of negligence, and claim that the company failed to notify customers as soon as it learned of the theft.

"In one of the largest-ever commercial breaches of private information, Target failed to secure the payment information of its customers over the busy holiday shopping season,” reads one of the suits, filed by Minneapolis attorney E. Michelle Drake. "As a consequence of Target's conduct, Plaintiffs and the classes are exposed to fraudulent charges, identity theft, and damage to their credit scores."

If the whole hacking ordeal wasn’t bad enough, KrebsOnSecurity reports that the stolen credit card information is being sold in the underground black markets for between $20 and $200. Even more, one security team was able to purchase a portion of the numbers before Target admitted to the data breach. That seemingly backs up the lawsuit claiming that Target didn’t acknowledge the problem in a timely manner.

That said, the fines Target will likely face with the PCI Council will merely be the proverbial tip of the iceberg.

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  • 6 Hide
    CaedenV , December 23, 2013 7:00 PM
    Can't wait to hear more details about this, it isn't every day that such a monumental tech failure happens. Did it go out with a firmware update on the POS systems? On the card readers themselves? Did a disgruntled employee let them in? Or was it a group that was actually competent at pulling a stunt off (unlike certain other nameless organizations that claim they can take down the entire internet).

    Funny thing is that I was in a Target during that time to do some holiday shopping, but as their prices were too high, and I couldn't find exactly what I was looking for I happened to go elsewhere. But $15 less and I would be in the thick of this along with 39,999,999 other people.
  • 6 Hide
    Martell1977 , December 23, 2013 7:04 PM
    The lawyers are really the only ones that benefit from class action suits. Target should make a deal with lifelock and offer it to everyone affected free for a year. Hope they catch the perps fast.
  • 8 Hide
    junkieXL , December 23, 2013 7:20 PM
    I concur with @Martell1977, this seems to be over the top. Not trying to protect the negligent corporation here, but first of all, Target provides services to its customers that represents a true value, and they are not the ones who stole the information. Granted, they failed to protect it in the face of an attack, yet that is not unlike burglars breaking into a house and swiping all the credit cards they find. One could always argue inadequate property protection and claim that a better alarm system etc. could have thwarted the intrusion, but both sanity and common sense dictate that the house owner is the victim, while the perpetrator must be held liable for the crime. The owner may have been negligent, but this must be proven beyond doubt and it's the lesser of the two evils here. Second, the vulturous scapegoatry that typically surrounds such class action lawsuits is pretty disgusting.
  • -6 Hide
    jasonelmore , December 23, 2013 7:31 PM
    This will probably be the end of Target. mark my words
  • 2 Hide
    JOSHSKORN , December 23, 2013 7:32 PM
    $3.6 billion? Ouch. Looks like someone really hit their "target" dead-on.
  • 3 Hide
    Stevemeister , December 23, 2013 7:51 PM
    A security breach is one thing but if the perpetrators when caught were publicly executed then it may discourage similar behaviour from other criminals but if caught they will probably get an 18 month sentence in a low security prison. Instead of pushing for more severe sentences for the criminal element we have a bunch of lawyers licking their lips at the money they can get from this debacle. Lets catch and punish the offenders so severely they won't want to do it again.
  • 0 Hide
    antdes45 , December 23, 2013 7:54 PM
    Never saw the cash registers at Target, but if they're like I think they're embedded PCs imaged through pxe running Windows XP with full internet access updated over Active Directory. Sounds easy enough to inject some malware in there.
  • -1 Hide
    bigpinkdragon286 , December 23, 2013 9:52 PM
    In all of what has been said about this, the glaring omission seems to be any lack of encryption, or safeguarding of the data, should it fall afoul of it's intended use. I suspect either Target royally overlooked security, or the data was cleverly captured before being obfuscated.
  • 3 Hide
    typicalGeek , December 23, 2013 10:23 PM
    re: Otacon's comment.
    How is the government to blame?

    The BANKS are the ones that have been resisting the switch to more secure chip embedded credit cards. While Target may shoulder some of the blame for this attack (very hard to determine due to lack of details thus far) the banks are the ones that have to this point determined that having easy to clone cards is better than paying for more secure cards.

    That's rather like deciding it's time to start locking the vault only after you've been robbed a few times.
  • 0 Hide
    hakesterman , December 23, 2013 10:32 PM
    I highly doubt this is the end of Target, and i also doubt very much that Target will pay any significant fine or anything related to this. This could of happened to any store and this is probably just the beginning for these guys who are sending viruses and malware. Seems like somebody gets hit at least once or twice a year these days. Sony got hit not too long ago, and i think Sears got hit last year amongst others.
  • -2 Hide
    Anonymous , December 23, 2013 10:51 PM
    "A security breach is one thing but if the perpetrators when caught were publicly executed then it may discourage similar behaviour from other criminals but if caught they will probably get an 18 month sentence in a low security prison. Instead of pushing for more severe sentences for the criminal element we have a bunch of lawyers licking their lips at the money they can get from this debacle. Lets catch and punish the offenders so severely they won't want to do it again."

    complete bull. I know savvy computer users that have done nothing wrong, except clicking around in their browser and finding something wrong, an 'exploit' and getting 10+ year prison sentences.

    If you knew anything about what you are talking about, you would know there are already countless unjust and very harsh penalties for finding and REPORTING very simple computer vulnerabilities. 18 months low security my ass. Considering how many talented young people I know in prison for 'hacking', it's no wonder this is going to likely turn up a foreign attack. What about that?
  • 1 Hide
    WyomingKnott , December 23, 2013 11:31 PM
    Purty darn stupid. If every company in the US that accepts credit cards is held liable for not having top-notch cyber security, then credit cards will simply stop being effective. Gross negligence, possibly a cause for a suit. But being the victim of a crime after taking reasonable precautions, no.

    I have, of course, no evidence that Target did not take reasonable precautions. Just saying "if."
  • 0 Hide
    kingnoobe , December 24, 2013 2:56 AM
    I think some of you may have missed, "If retailers are found violating the standard, they’re fined $50 to $90 per cardholder data compromised". That's if they are found violating the standard..

    On top of that not notifying the people effected in a reasonable amount of time.

    Now from what I gather these are just allegations at the moment, but if found to be true it's completely on target in every way.

    Though I will agree that only lawyers will be the ones really getting paid while the people actually affected (depending on their bank, with mine I doubt I would have an issue) may have to jump through some hoops to get everything taking care of.
  • -1 Hide
    SteelCity1981 , December 24, 2013 4:09 AM
    if they don't end up going bankrupt over this mess they will surely be in a lot of financial trouble after this. let this be a strong message to retailers that when you handle peoples hard earned money you better have top notch security to protect their assets.
  • 0 Hide
    TeeSquar , December 24, 2013 5:29 AM
    Guess they should have allowed those Salvation Army bell ringers outside their stores. Paybacks are a biatch.
  • 0 Hide
    soldier44 , December 24, 2013 5:39 AM
    $100 Target gift cards for everyone effected by this to start. Plus their money back on there purchases during that time.
  • 0 Hide
    chriz78 , December 24, 2013 6:22 AM
    I live in Minnesota where Target is based. It would be a huge blow to this state if Target went out of business. I've always preferred going to Target anyways. They may not always have the same prices and selection as Walmart, but everything else is better.
  • 0 Hide
    hasten , December 24, 2013 8:43 AM
    @Typicalgeek and Ocatcon

    Merchants are the party that are resisting the chip card. I am a manager for a midsized Credit Union and oversee the plastics department. Stock would be more expensive, but financial institutions eat most of the fraud costs these days - the added stock cost would be next to nothing vs fraud expense. So you are both wrong.

    And let's all calm down. The market for CC information is much smaller these days. In the past a breach like this would be sold to European criminals, but since most of Europe is on the chip... there will likely be some fraud, but just cause you used your card at Target doesn't mean it will affect you. Plus zero cardholder liability blah blah blah. Media loves this crap.
  • 0 Hide
    Rhinofart , December 24, 2013 9:26 AM
    @antdes45. Why would you say such a thing? You obviously have no clue about larger networks, or POS systems. Their POS systems may infact be Windows Embedded, but they are highly modified OS installs. Not to mention, the POS network would be nowhere near internet facing. And when it does go out to connect to the banks for their transactions, it would be over special circuts, like MPLS, Managed T1's, etc. Locked down with proper ACLs. I know for a FACT that most ATMs from NCR run Windows NT 4.0 (recently "upgraded" from OS2/Warp). Yes, it's windows foundation, but they are highly specialized, custom built HALs, and drivers for the hardware they hook up to it. You can't take a dispenser from an ATM, and hook it up to your home Windows machine, and have the system detect an NCR 5886 series cash dispenser.

    This BS from lawyers and people down in the states sueing over every damn little thing is ridiculous. All companies will get hacked. WILL! It's not If, it's when. There will always be someone who finds a way to circumvent protections in place. The next thing we hear is that some family in Oklahoma is sueing their kids school because some other kid got better grades than their kid, and it made them feel bad. Give your heads a shake. Common sense is sorely lacking in this greedy capitalist world.
  • 0 Hide
    gondor , December 24, 2013 10:05 AM
    Why does ANY retailer feel compelled to keep personal information about their customers ? What they should have done was process the payment, issue goods and be done with that transaction (credit card holder information is NOT needed for bookkeeping purposes). Instead they decided to hoard information that is completely irrelevant to their business and thanks to their crappy security and gross mishandling of this private information they should damn well be held accountable and cough up the fine (+ damages to everyone affected). They are just as guilty (if not more) than the perps who committed the cyber-break-in.
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