How we recovered over $300K of Bitcoin

Posted in Uncategorized by Mike Stay on 2020 April 3

Story time! Around twenty years ago, I was working as a reverse-engineer and cryptanalyst for AccessData while getting my Physics degree at BYU. It was the late 90s and early 2000s. The US government had been gradually easing off export restrictions on software containing cryptography, but most software still contained pretty worthless password protection. We’d buy desktop office software, I’d reverse-engineer it to figure out what algorithm it was using for access control, and then break the crypto. It was a never-ending stream of interesting-but-not-impossible math puzzles. I wrote about forty password crackers during my time there. We would sell them to home users, system administrators, and local and federal law enforcement agencies. I got to go down to the Federal Law Enforcement Training Center in Glynco a few times to teach the Secret Service, FBI, and ATF about cryptography and the use of our products.

Two projects really stand out in my memory. The first was Microsoft Word 97. Before Word 97, the files were encrypted by xoring the bytes with a repeating 16-byte string derived from the password. The most common bytes in a Word file were usually either 0x00, 0xFF, or 0x20 (space), so we’d just look at the most common character in each column and try the 316 variations on those. Recovering the key was usually instantaneous, but to help people feel like they’d gotten their money’s worth, we’d put on a little animated show like a Hollywood hacking scene with lots of random characters that gradually revealed the right password.

Microsoft 97 changed that. It might have been possible to find out the encryption format through MSDN, but we were small and couldn’t afford a subscription. It also wasn’t clear that we’d be allowed to write the cracker if we did get the info from them. To figure out how it worked, I used SoftICE to stop the software immediately after typing in the password, then walked slowly up the stack until I could find the algorithm. This was before IDA Pro, so I printed out a few dozen pages of assembly code, taped it to the wall, and drew all over it with a red crayon. I was very pleased when I finally worked it all out. At the time, Microsoft was only allowed to export 40 bit cryptography, so they did as much as they were legally permitted: they’d repeatedly MD5 hash the password with “salt” (randomly chosen bytes stored in the file) to get the 40 bit key, then add salt to that and repeatedly hash it again. It took roughly half a second to test a password on the computers of the time. We had to resort to a dictionary attack, because breaking it outright was pretty much impossible. We did eventually write a cracker for larger companies and agencies that brute-forced the 40-bit keyspace using those fancy MMX instructions on the Pentium. I knew of one place that ran the software for nine months before finally getting in.

The other really fun one one was zip archives. The developer of PKZIP, Phil Katz, made the decision—unusual at the time—to document his file format and include it with his software, making it a favorite of developers. Roger Schlafly designed the stream cipher used for encrypting the archives. The zip standard quickly became by far the most popular compression format on Windows, and many other formats like Java’s .jar format and OpenOffice’s document formats are really zip files with a particular directory structure inside. InfoZIP is an open-source version of the software; its implementation was used as the basis for nearly all other branded zip software, like WinZip. At the time I was trying to crack it, WinZip had 95% of the market.

Eli Biham and Paul Kocher had published a known-plaintext attack on the cipher, but the known plaintext was compressed plaintext. To get the Huffman codes at the start of a deflated file, you basically need the whole file. The attack was practically useless to law enforcement agencies.

The zip cipher has 96 bits of internal state split into three 32-bit chunks called key0, key1, and key2. key0 and key2 are the internal state of two copies of CRC32, a linear feedback shift register. Basically, to update the state with a new byte of data, you shift all the bytes down by one byte (dropping the low byte) then xor in a constant from a lookup table indexed by the byte of data xored with the low byte. key1 is the internal state of a truncated linear congruential generator (TLCG). To update its internal state, you add the data byte, multiply by a constant I’ll call c, and add 1. The cipher works like this: you feed in a data byte to the first CRC32, then take the low byte of that and feed it into the TLCG, then take the high byte of that and feed it into the second CRC32, then take the state and (roughly) square it, then output the second byte of the result as the stream byte. To initialize the 96-bit state, you start from a known state and encrypt the password, then encrypt ten bytes of salt.

PKZIP got its salt bytes by allocating memory without initializing it, so it would contain bits of stuff from other programs you’d been running or images or documents, whatever. That worked fine on Windows, but on many Unix systems, memory gets initialized automatically when it’s allocated. InfoZIP chose the salt bytes by using C’s rand function. It would initialize the state of the random number generator by xoring the timestamp with the process ID, then generate ten bytes per file. Had they left it that way, knowing the timestamp and process ID would be enough information to recover the header bytes, which in turn would let you mount Biham and Kocher’s attack. It seems the InfoZIP authors knew about that attack, because they went one step further and encrypted the headers once using the password. That way an attacker had only doubly-encrypted plaintext, and their attack wouldn’t work.

I noticed that because the password was the same in both passes, the first stream byte was the same each pass. Just like toggling a light switch twice leaves it where it started, xoring a byte twice with the same stream byte leaves it unaffected. This let me mount a very powerful ciphertext only attack: given five encrypted files in an archive, I could derive the internal state of C’s rand function without having to look at the timestamp or knowing the process ID. That let me generate the original, unencrypted headers. Because only a few bits of each part of the cipher affected the next part, I could also guess only a few bits of the state and check whether decrypting the next bytes twice gave me the answer I was expecting. I had to guess fewer and fewer bits of key material as I went on. Each extra file also let me exclude more potential key material; at the time, it took a few hours on a single desktop machine. I published a paper on it and got to present it in Japan at Fast Software Encryption 2001.

I left AccessData in 2002. I worked for a neural networking startup for a year, spent three years on a Master’s degree in Computer Science at the University of Auckland with Cris Calude, started a PhD with the mathematical physicist John Baez at UC Riverside, worked on Google’s applied security team for six years and finished the PhD, and after a few more years ended up as CTO of a startup.

About six months ago, I received, out of the blue, a message on LinkedIn from a Russian guy. He had read that paper I’d written 19 years ago and wanted to know if the attack could work on a file with only two files. A quick analysis said not without an enormous amount of processing power and a lot of money. Because I only had two files to work with, a lot more false positives would advance at each stage. There would end up being 273 possible keys to test, nearly 10 sextillion. I estimated it would take a large GPU farm a year to break, with a cost on the order of $100K. He astounded me by saying he could spend that much to recover the key.

Back in January of 2016, he had bought around $10K or $15K of Bitcoin and put the keys in an encrypted zip file. Now they were worth upwards of $300K and he couldn’t remember the password. Luckily, he still had the original laptop and knew exactly when the encryption took place. Because InfoZip seeds its entropy using the timestamp, that promised to reduce the work enormously—”only” 10 quintillion—and made it quite feasible, a matter of a couple of months on a medium GPU farm. We made a contract and I got to work.

I spent a while reconstructing the attack from the overview in the paper. To my chagrin, there were certain tricky details I had skimmed over in my paper, but I worked them out again. Then I discovered I’d made a terrible mistake while estimating the work!

In my original attack, I would guess the high bytes of key1·c, key1·c², key1·c³, and key1·c⁴. By the time I guessed that fourth byte, I knew the complete state of the rest of the cipher; I just had to convert those four bytes into the original key1 and I was done. I would run through the 32-bit state space for key1 and check each one to see if it gave the proper high bytes. Here, though, I had quintillions of keys to check; if I had to do 232 tests on each one, it would take a few hundred thousand years.

I vaguely remembered that there had been some work done on cryptanalyzing TLCGs using lattice reduction, so I dug out the original paper. It was perfect! I just needed to define a lattice with basis vectors given by 232 and the powers of the constant from the TLCG, then do lattice reduction. Given the reduced basis, I could recover the original state from the high bytes just by doing a matrix multiplication.

At least, that was the idea. I would need five bytes to constrain it to a single outcome, and at that point in the attack, I only had four. The process described in the paper rarely gave the right answer. However, I knew the answer had to be close to the right one, so I ran through all the possible key1 values and checked the difference from the answer it gave me and the true one. The difference was always one of 36 vectors! With this optimization, I could run through just 36 possibilities instead of four billion. We were still in business.

The next thing we ran into was the problem of transferring data between the machines with the GPUs on them. My business partner, Nash Foster, was working on the GPU implementation, advising me on how fast different operations are and writing a lot of the support structure for the application into which I put my crypto cracking code. How would we get these petabytes of candidate keys to the GPUs that would test them? They’d be almost idle, twiddling their thumbs waiting for stuff to work on. It occurred to me that each stage of my attack was guessing a lot of bits and then keeping only one candidate out of roughly 65K. If I had some way of using that information to derive bits rather than just guess and check, I’d save a lot of work, and more importantly, a lot of network traffic. The problem with that idea was that the math was too complicated; it involved mixing the math of finite fields with the math of integer rings, and those don’t play nicely together.

I thought about other cryptanalytic attacks I knew, and one that seemed promising was a meet-in-the-middle attack. A meet-in-the-middle attack applies to a block cipher when it uses one part of the key material to do the first half of the encryption and the other part of the key material to do the second half. That sort-of applied to the zip cipher, but the key material far outweighed the number of bits in the middle. Then it occurred to me that I could use the linearity of CRC32 to my advantage: by xoring together two outputs of the last CRC32, the result would be independent of key2! Rather than compute the intermediate state of the cipher and store it in a table, I’d calculate the xor of two intermediate states and store that instead.

I wrote up the differential meet-in-the-middle attack and ran it on my laptop. A stage that had taken hours on my laptop before now finished in mere seconds. The next stage, which I expected to take a week on the GPU farm finished in a few hours on a powerful CPU. I couldn’t quite make it work fast enough on the third stage to be useful in speeding up the overall attack, but it completely obviated the need to move data around: we simply computed the candidates for each GPU on the computer with the cards in it. Nash wrote the GPU code, which ran screamingly fast.

The attack ran for ten days and failed.

I was heartbroken. Had we missed one of the candidate keys? We went back and looked at the maximum process ID on his laptop and discovered it was a few bits larger than we had expected, and therefore there were a couple of other possible initial seeds for rand. I also went back and double-checked all our tests. Was there something we’d missed? Did the CPU-based version behave any differently from the GPU version? Our client was re-running our tests and discovered that the GPU version failed to find the correct key when it was the second in a list of candidates, but it worked when it was the first one. Digging into the code, we found that we had swapped the block index with the thread index in computing the offset into the data structure.

We fixed the bug, re-ran the code, and found the correct key within a day. Our client was very happy and gave us a large bonus for finding the key so quickly and saving him so much money over our initial estimate.

I’m currently looking for work in a staff or senior staff engineering or data scientist role. If you’ve got interesting technical analysis or optimization problems, please reach out to me and let’s talk.


52 Responses

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  1. Rohan Singh said, on 2020 April 3 at 5:39 pm

    Brilliant story. Out of curiosity… are you able to share what the key actually was?

    • Mike Stay said, on 2020 April 3 at 6:13 pm

      Hahaha no.

      • Carl said, on 2020 August 8 at 4:47 am

        Was the key random, or a word and how long was it? I don’t want to know the real key, just give me some trivia. Was it latin or cyrillic? It’d be really interesting to know if he forgot it because of randomness or because its length. Anyway thanks for your story!

        • Mike Stay said, on 2020 August 10 at 4:47 pm

          We didn’t recover the password itself. Zip encryption works by converting the password to a 96-bit key, which is used to encrypt the files; we recovered the 96-bit key, which sufficed to get the bitcoin back. Had the client been interested, we could have mounted a hashcat attack on the 96-bit key to recover the original password, but he didn’t care.

          • Carl said, on 2020 August 12 at 7:31 am

            Ohh you took a shortcut? Sorry I really have to look again at your DEFCON talk and work out the maths behind this “flawed” version of zip encryption. I only really know there are several ways to encrypt a zip file from the options in 7-zip. But don’t expect me to quite follow, I’m just a regular scientist, not a physicist. Latter being just amazing at mathematic problems.

            Thanks for clarifying. Bear with me if I didn’t read all, but could you also just work with the header/footer of the ZIP? I’m curious how much this guy trusted you. Would be totally understandable if you’ve never had the chance to see the actual archive contents because you found the hash based on partial data from a header/footer.

            Gomenasai Mr Stay.

            • Mike Stay said, on 2020 August 12 at 7:53 am

              Cryptanalysis is figuring out how to break a cipher faster than the “brute force” approach of guess-and-check. After my attack from 20 years ago, WinZip and the rest of the commercial programs adopted strong cryptography, but Info-Zip still uses the old encryption designed by Schafly. He was an amateur, but did a surprisingly good job. There’s a known-plaintext attack by Biham and Kocher where if you have a copy of one of the compressed files in the archive, then you can recover the others; but in practice, you rarely do. My attack depends on details of Info-Zip’s implementation that don’t apply to PKZIP. Even using the old encryption, a PKZIP archive with a good passphrase is still unbreakable in practice!

              We only had the encryption headers; our client zeroed out the bytes corresponding to the encrypted data before sending the file to us.

    • Mujahid Williams said, on 2020 May 14 at 3:30 am

      Please I need help .I bought Bitcoins in 2013 lost all details .all I have is the credit card details which I used when I bought them.please im need help

  2. technobt said, on 2020 April 3 at 6:38 pm

    This is the shit that I pay for internet. Really great story, just given me reasons to stop procrastinating. Thank you for sharing.

  3. Geert Bosch said, on 2020 April 3 at 7:43 pm

    Great story! With your skill, analytical way of thinking and persistence, you should be able to land a great job. One question though: in the sixth paragraph you talk about shifting all bytes left, dropping the high byte. However, IIRC, for CRC you rotate the bytes and then xor in the table byte indexed by the new data. If you’d drop the high byte, the CRC would only depend on the last 4 data bytes.

    • Mike Stay said, on 2020 April 3 at 7:57 pm

      You do shift to the left, not rotate, but you’re totally right that it’s the low byte that gets xored with the data byte, not the high one. Fixed!

  4. John Belshaw said, on 2020 April 3 at 9:25 pm

    Very interesting. Some of the new crypto currencies use the argon2 hash algorithm as an to calculate a one-way hash in a mining algorithm and use an elaborate in memory data structure to discourage asic development. In your opinion is such an aproach vulnerable to a gpu attack using the techniques you describe?

    • Mike Stay said, on 2020 April 3 at 10:06 pm

      I have no idea. I’ve never looked at them. I rather doubt it; good cryptography has become ubiquitous over the last 20 years.

  5. instaoriginal said, on 2020 April 4 at 5:13 am

    How in the world are you jobless?! You’re so talented!!! Great job on the encryption breaking, being honest to your client about the time it took and your writing was awesome to boot!

  6. matiaswilkman said, on 2020 April 4 at 9:21 am

    Is there an implementation of this key recovery technique available?

  7. Nathan Loden said, on 2020 April 4 at 4:30 pm

    Truly inspiring. Did you develop the key cracking code in C?

  8. daniel said, on 2020 April 5 at 9:07 am

    damn, i felt like i am watching Mr.robot, that was really cool.
    i have two question.
    what was the encryption that been use for password?
    how to start in cryptography? what is your advice for a beginner?
    P.s: I am a bug bounty hunter, programmer.
    and thanks for sharing 🤗😊

    • Mike Stay said, on 2020 April 5 at 3:15 pm

      Haha, thanks.

      > what was the encryption that been use for password?

      It was Schlafly’s zip cipher. While it’s “weak” in the sense of able to be broken, it has held up remarkably well compared to most of the other amateur ciphers I broke.

      > how to start in cryptography? what is your advice for a beginner?

      Schneier’s self-study course is a reasonable place to start:

      > P.s: I am a bug bounty hunter, programmer. and thanks for sharing

      Thanks for your interest!

  9. Anon said, on 2020 April 5 at 9:40 am

    Nice story. What age did you start programing, coding and all tho? And if you dont lind me asking, how old are you now

    • Mike Stay said, on 2020 April 5 at 3:20 pm

      I started programming when I was 10 on a Vic-20 with 3 kilobytes of RAM; you can probably work out my age from that! :D

  10. kazimierz said, on 2020 April 5 at 9:53 am

    Czesc jestem z Polski , porozmawiam z moim partnerem o tobie
    pozdrawiam i milego dnia kazimierz

  11. Cesar Souvannasap said, on 2020 April 6 at 5:30 am

    You really make it seem so easy with your presentation but I find this topic to be actually something that I think I would never understand. It seems too complex and extremely broad for me. I am looking forward for your next post, I’ll try to get the hang of it!

  12. Moses said, on 2020 April 6 at 10:46 am

    While I understand you aren’t able to share the key, can you share its complexity?

    • Mike Stay said, on 2020 April 6 at 11:32 am

      Sorry, I don’t know quite what you mean. There was the password to the zip file; we never learned it, as it was not necessary for decrypting the archive. There were the 96 bits of key for the zip file, derived from the password, which were just 96 random-looking bits. And there were the bitcoin keys he had stored in the zip file, which we didn’t look at.

      • Rohan Singh said, on 2020 April 6 at 11:49 am

        Ah, I see. I misunderstood the method and thought you could actually recover the password. That’s what I meant when I asked what the key was originally.

        • Mike Stay said, on 2020 April 6 at 2:05 pm

          OK. There’s a hashcat module that takes the 96-bit zip encryption keys and tries to figure out a password from them, if you really needed the original password and not just the data in the zip file.

  13. 孙强 said, on 2020 April 7 at 7:13 pm

    Nice to meet you.
    I want to ask if this story you wrote means that you can crack any Bitcoin wallet.dat file sending passwords?

    • Mike Stay said, on 2020 April 7 at 7:14 pm

      No. I broke the encryption on a zip file, not a Bitcoin wallet.

      • 孙强 said, on 2020 April 7 at 7:23 pm

        Thank you for your reply.
        Is there any chance to crack Bitcoin wallet.dat sending passwords in an easy way or can you share some ideas of making it possible?
        You know there are a lot of wallet.dat files without sending passwords available on the internet, and they contain a good fortorn of assets that can make us very rich only need a bunch of characters:)

        • Mike Stay said, on 2020 April 7 at 8:02 pm

          There are probably hashcat modules for all the popular wallets.

  14. Can you help me? said, on 2020 April 7 at 7:14 pm


    • Mike Stay said, on 2020 April 12 at 7:22 am

      No, sorry. Zip files are much easier to break than bitcoin wallets.

  15. Rohan said, on 2020 April 11 at 8:20 am

    Take a bow , sir. You are awesome.Truly inspiring !!!

  16. gregg4 said, on 2020 April 11 at 7:15 pm

    Oddly enough I’ve been using PKzip software since the man invented it. My brother was actually introduced to him. But I did not know that he literally gave away a paper containing those details with how that part of his software worked. Can you supply a point or two?

    • Mike Stay said, on 2020 April 11 at 7:49 pm

      The whole file format is described in appnote.txt, part of any distribution.

      • gregg4 said, on 2020 April 11 at 8:05 pm

        I’ll look for it then. Good story I forgot to add.

  17. KSTinMB said, on 2020 April 11 at 7:27 pm

    Inspiring story. I almost have two LEDs blinking together on my Arduino. Any day now.

  18. […] Stay broke an old zipfile encryption algorithm to recover $300,000 in […]

  19. Prashant Pandit said, on 2021 January 8 at 11:27 pm

    I hv just the wallet address, can you help me recover my Bitcoins

    • Mike Stay said, on 2021 January 9 at 2:24 pm

      No, without the wallet.dat file they’re gone.

      • Kost said, on 2021 April 23 at 1:46 am

        I have 75bitcoin locked inside an AES-256-cbc encrypted file, it uses this implementation:

        It’s currently worth about $4million, I have tried till my heart contents, became a master of hashcat, done everything I can to get my bitcoin back with no luck.

        • Mike Stay said, on 2021 April 23 at 8:09 am

          Sorry to hear that. Breaking the zip cipher is a lot easier than breaking AES!

          • kost said, on 2021 April 23 at 3:32 pm

            True, but I was wondering if the random guys implementation of AES may be flawed in some way.

            • kost said, on 2021 April 23 at 3:36 pm

              Willing to offer $1million(worth of bitcoin) to whoever can find out how.

              • Mike Stay said, on 2021 April 23 at 3:46 pm

                I could do a code review for you, but I’d need to be paid for my time.

  20. Mass said, on 2021 August 19 at 3:31 pm


    I buy a wallet have more than 250 bitcoin from ebay
    Way back I think it was 2012/2011. So i send the bitcoin to new wallet and make a password for the rar. In 2017 i try to remamber the password with no luck and try to burtforce using hashcat and also no luck.
    I try john the ripper but also no luck.
    I store the rar file in usb and keep it in safe place thing maybe someday i will find a way to open it.
    then i read your article.
    If you can help. Please send me email.

    • Mike Stay said, on 2021 August 19 at 8:16 pm

      Rar uses much stronger encryption than zip. I can’t do better than hashcat and jtr for rar files.

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