AI-Powered Hackers Breach 2,250 Microsoft Tenants in Rapid Supply Chain Strike

China-aligned cyber actors have successfully infiltrated more than 2,250 Microsoft 365 tenants by exploiting stolen credentials from the ConnectWise platform, marking a significant escalation in the use of artificial intelligence for large-scale supply chain attacks. According to Microsoft’s Security blog, the group, identified as Storm-0940, utilized ARTEX, an open-source agentic AI penetration testing framework, to automate and accelerate their intrusion attempts. The attack’s velocity was striking, with some targets achieving privileged access in less than three hours after initial targeting, leaving defenders with minimal time to react.

The operation relied heavily on automated password spraying, a technique that targets multiple accounts with a small set of common passwords. This campaign hit 327 accounts across eight organizations, resulting in over 151,000 failed logon attempts, though none of these specific guesses succeeded. However, the primary vector was the misuse of stolen ConnectWise application credentials. These credentials allowed the attackers to authenticate as applications rather than interactive users, bypassing standard user sign-in processes. This method enabled the AI agents to scan, reconnoiter, and exploit OAuth application abuse with a speed that human-operated tools typically cannot match.

At the peak of the operation on October 11, the attackers generated 2,900 password spray attempts per minute, totaling more than 111,000 failures in a single day. While nearly 98% of these activities were locked out by security controls, the use of application identities proved far more effective. The attackers signed into customer tenants from a single IP range, executing more than 200 sign-ins in under four minutes using just four application credentials. This rapid sweep, which proceeded through tenants in a sorted order with only seconds between attempts, indicated a scripted approach working from a pre-defined target list.

Security firm Huntress observed specific behaviors in one tenant on October 15, where an application added itself to the top administrator role. This action triggered a Microsoft Defender alert for 'Application self-assigned Global Administrator role.' The attackers also planted new secrets set to expire in 2028, a tactic often used to maintain persistent access. By October 16, Huntress had confirmed unauthorized sign-ins for 162 tenants. The following day, the number of Entra tenants showing sign-in activity from the attacking IP rose to nearly 1,000, with more than 300 of those sign-ins succeeding. The group targeted 14 industries, including aerospace and defense, semiconductors, government, and think tanks.

Microsoft clarified that the attack did not stem from a vulnerability in their own systems or products, but rather from the compromise of the multi-tenant ConnectWise application. The use of ARTEX, described as a system of LLM-driven agents capable of running autonomous penetration tests, allowed the attackers to operate with little human interaction. This automation sped up reconnaissance and exploitation, creating a pressure that traditional defense mechanisms struggle to handle. The framework’s developer, known as 'Autumn-27,' recently announced on GitHub that the project would cease updates and transition to closed source, a move that may impact other threat actors relying on the tool.

The broader implications of this attack extend beyond ConnectWise users. Public reporting this month linked ARTEX to breaches at South Korean financial institutions, suggesting a trend of threat actors in multiple regions adopting this technology. CrowdStrike noted that the suspect in those separate incidents was likely based in China and allegedly used ARTEX with Anthropic’s Claude Code. This indicates a growing convergence of state-aligned actors and advanced AI tools in the cyber threat landscape, forcing organizations to rethink how they monitor and secure their identity and access management systems.

In response to the incident, ConnectWise suspended its Cloud Backup, SaaS Security, and Cloud Management services as a precautionary measure. The company has initiated a phased restoration process, with full 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 activity logs from this month to identify any potential unauthorized access or changes to identities and roles.

This incident highlights the shifting dynamics of cyber warfare, where speed and automation are key advantages for attackers. The ability of AI agents to work around the clock and adapt their tactics in real time poses a new challenge for security teams. As the investigation continues, the focus remains on understanding the full extent of the compromise and how the initial ConnectWise credentials were stolen. The event serves as a critical reminder for Southeast businesses and other sectors to audit their third-party application integrations and prepare for AI-driven threat vectors.