AI-Driven Breach: Chinese Hackers Exploit ConnectWise to Sweep Microsoft Clouds

Automated AI agents have accelerated a major supply chain breach, enabling a Chinese state-aligned group to probe thousands of corporate cloud environments in a matter of hours. Microsoft disclosed that the actor, known as Storm-0940, leveraged an open-source penetration testing framework to move at a pace that left defenders with minimal time to react.

The operation began with unauthorized access to the multi-tenant application ConnectWise. Using stolen application credentials that required no interactive user sign-in, the attackers attempted to log into more than 2,250 Microsoft 365 tenants. In several instances, the group achieved privileged access less than three hours after initially targeting a specific tenant. This speed was made possible by the use of ARTEX, a system of LLM-driven agents that operate autonomously with little human input. These agents handled scanning, reconnaissance, and OAuth application abuse around the clock, significantly compressing the timeline for detection and response.

Parallel to the application-based attacks, the group conducted aggressive password spraying campaigns. These automated guesses targeted 327 accounts across eight organizations, resulting in over 151,000 failed logons without any successful intrusions. The peak activity occurred on October 11, when the system attempted nearly 2,900 logins per minute, totaling more than 111,000 attempts that day. While 98% of these attempts were locked out, the simultaneous success of the application credential attacks allowed the agents to sign into customer tenants from a single IP range. In one rapid burst, over 200 sign-ins were recorded in under four minutes using just four application credentials.

The targeted industries included aerospace, defense, semiconductors, government, and think tanks, with 14 sectors listed in total. Microsoft confirmed that the attack did not stem from a vulnerability in its own systems but rather from the compromise of the third-party application. In one specific tenant, the security firm Huntress observed an application assigning itself the global administrator role on October 15. The attackers also planted new secrets configured to expire in 2028. By October 16, Huntress had confirmed unauthorized sign-ins for 162 tenants, a number that rose to nearly 1,000 by the following day, with more than 300 successful logins identified.

The use of ARTEX marks a shift in traditional attack methodologies. The framework, which can utilize any AI model, has been linked to other breaches, including recent incidents at South Korean financial institutions. In those cases, the suspect was alleged to have used ARTEX with Anthropic’s Claude Code. In response to the growing threat, the developer of ARTEX announced that the project would no longer be updated and would transition to closed source. This move may impact other threat actors who rely on the tool for autonomous operations.

ConnectWise has suspended several of its services, including Cloud Backup and SaaS Security, as a precautionary measure. The company has initiated a phased restoration process, with recovery expected to take several days. While there are no current indicators that partner backup data was compromised, Microsoft advises customers to keep affected app connections disabled until formal restoration instructions are issued. Organizations are also urged to review their activity logs from this month to identify any anomalous behavior associated with the attack.