Karma (MedusaLocker) Encryptionless Extortion

BLUF

 A shift in ransomware strategy where actors prioritize data theft and public shaming over encryption, specifically targeting healthcare and industrial sectors.

Executive Cost Summary

This cost analysis was developed by the CyberDax team using expert judgment and assisted analytical tools to support clarity and consistency.

For organizations affected by Karma (MedusaLocker-style) encryptionless extortion involving data theft, coercion, and public exposure threats.

·       Low-end total cost: $750K – $2.0M

·       (Limited data volume, fast containment, minimal public disclosure)

·       Typical expected range: $3.0M – $8.5M

·       (Confirmed exfiltration, operational disruption, regulatory response required)

·       Upper-bound realistic scenarios: $10M – $22M

·       (Sensitive data exposure, prolonged investigation, litigation, and reputational fallout)

Key Cost Drivers

·       Volume and sensitivity of exfiltrated regulated data

·       Duration of undetected attacker access before containment

·       Scope of forensic investigation and legal discovery

·       Regulatory notification and enforcement requirements

·       Customer, partner, or patient notification scale

Targeted Sectors

·       Healthcare (50% of recent victims)

·       Retail (Hartford)

·       Industrial Control Systems (ICS).

Countries

·       Global

First Reported

·       January 15, 2026

Last Update

·       January 16, 2026

Threat Actor

·       Coinbase Cartel

o   Lynx Ransomware (rebranded RaaS).

TTPs

Initial Access

·       T1078 Valid Accounts

o   Threat actors use stolen or brute-forced credentials to access networks, often via Remote Desktop Protocol (RDP) vulnerabilities.

·       T1133 External Remote Services

o   Exploitation of vulnerabilities in RDP and other remote access services to gain an initial foothold.

·       T1566.001 Phishing: Spearphishing Attachment

o   Using malicious emails with booby-trapped attachments to deliver the malware.

Execution

·       T1059 Command and Scripting Interpreter (e.g., PowerShell)

o   Execution of a batch file that runs a PowerShell script for various malicious activities, including invoke-ReflectivePEInjection.

·       T1021.001 Remote Services: Remote Desktop Protocol

o   Using RDP for lateral movement and access once initial access is achieved.

·       T1569.002 System Services: Service Execution

o   Using tools like PsExec to aid in lateral movement and execution on other systems.

Persistence

·       T1053 Scheduled Task/Job

o   Creation of a scheduled task (e.g., "svhost") to run the ransomware executable every 15 minutes and maintain persistence.

·       T1547.001 Boot or Logon Autostart Execution: Registry Run Keys / Startup Folder

o   Adding registry entries to execute the malware upon system startup.

Defense Evasion

·       T1562.001 Impair Defenses: Disable or Modify Tools

o   Terminating processes related to security, accounting, and forensic software to avoid detection.

·       T1562.009 Impair Defenses: Safe Mode Boot

o   Restarting the machine in safe mode to bypass endpoint defenses which often do not run in safe mode.

Credential Access

·       T1003 OS Credential Dumping

o   Using tools like Mimikatz or leveraging LSASS (Local Security Authority Server Service) to extract credentials.

Discovery & Lateral Movement

·       T1046 Network Service Scanning

o   Using network scanning tools like NetScan to map the network and identify targets.

·       TA0008 Lateral Movement

o   Moving across the network using valid credentials in combination with built-in protocols like RDP and SMB.

Impact & Exfiltration

·       T1486 Data Encrypted for Impact

o   Encrypting victim files using AES-256 and RSA-2048 algorithms and appending a .KARMA extension.

·       T1490 Inhibit System Recovery

o   Deleting shadow copies and local backups, and disabling startup recovery options to hinder data recovery efforts.

·       TA0010 Exfiltration

o   Stealing sensitive data before encryption and threatening to leak it publicly (double extortion). The group uses legitimate tools like Rclone or Mega accounts for data staging and exfiltration.

·       T1529 System Shutdown/Reboot

o   Manually shutting down or rebooting virtual machines and systems during the attack.

Malware Names

·       Karma Ransomware

Sample Analysis

SHA256

4dec9a9044631caef283c7f39a576e4e5c1cc1e6a97ce5c60936a3a3d0097818

Behavior

·       Appends .KARMA extension

·       modifies desktop wallpaper

·       Exfiltrates data before encryption.

Malware Family

·       Associated with the MedusaLocker family

·       It also shares significant code and structural similarities with the JSWorm and Nemty families.

Known Decoding Key

·       No universal public decryptor currently exists for 2026 variants. Decryption requires a unique private key held by the threat actors.

Verdict

·       Malicious / High-Risk.

o   It is classified as an aggressive enterprise-focused ransomware variant that employs double-extortion tactics.

Primary Objectives

Financial Gain

·       Extorting victims for cryptocurrency (primarily Bitcoin) payments.

Data Exfiltration

·       Stealing sensitive corporate data to leverage in "double-extortion" schemes.

Reputational Damage

·       Pressuring victims by threatening to leak stolen data to journalists or on their "Karma Leaks" onion site.

Threat Actor Context

·       First emerged in mid-2021 as a "young and hungry" operation.

·       Operates with a ruthless reputation, often targeting large organizations across various sectors, though they have occasionally claimed to avoid encrypting healthcare providers while still exfiltrating their data.

Actively evolves techniques

·       Recent 2026 reports highlight increased use of AI-augmented social engineering for initial access.

Behavior Analysis

Initial Access

·       Frequently utilizes unpatched vulnerabilities (e.g., ProxyShell in Exchange servers), RDP compromise, or phishing.

Lateral Movement

·       Uses legitimate tools like Cobalt Strike beacons and PowerShell scripts to move through the network.

Encryption Scheme

·       Employs a hybrid cryptographic scheme using RSA and AES or stream ciphers like Salsa20 and ChaCha20.

Persistence & Evasion

·       Creates a mutex named KARMA to prevent multiple instances and uses crypt32.dll for cryptographic functions.

Post-Infection

·       Appends the .KARMA extension to encrypted files, changes the desktop wallpaper, and drops ransom notes (e.g., KARMA-ENCRYPTED.txt or HOW_TO_RECOVER_DATA.html).

Suggested rules/ potential hunts

Suricata

Detection of known C2 IP addresses/domains: Write rules to alert on connections to known malicious infrastructure.

alert tcp any any -> [known_c2_ip] 443 (msg:"MedusaLocker C2 activity observed"; flow:established; classtype:trojan-activity; sid:XXXXXXX;)

While encrypted, unusual volumes of outbound traffic or connections to dynamic DNS services/proxy services (like Ngrok) can be indicative of data staging and exfiltration.

alert tcp any any -> any any (msg:"High volume outbound traffic to known dynamic DNS provider/proxy service"; flow:established; byte_purples:<threshold>; classtype:suspicious-activity; sid:XXXXXXX;)

MedusaLocker often gains initial access via RDP. Look for repeated failed login attempts.

alert tcp any 3389 -> any any (msg:"Possible RDP brute force attempt"; flow:stateless; threshold: type limit, track by_src, count 10, seconds 60; classtype:authentication; sid:XXXXXXX;)

SentinelOne

Identifying Exfiltration via PowerShell/Cloud Tools

ProcessCmd contains anycase "cloudflared" OR ProcessCmd contains anycase "ligolo" OR (ProcessCmd contains "powershell" AND ProcessCmd contains "Upload")

Defense Impairment (BYOVD & Service Disabling)

The threat uses "Bring Your Own Vulnerable Driver" (BYOVD) and batch scripts to kill EDR/AV processes.

ProcessCmd contains anycase "net stop" OR ProcessCmd contains anycase "sc stop" OR (EventType = "Driver Load" AND IsSigned = false)

Shadow Copy & Backup Deletion

Aggressive inhibition of recovery is a hallmark, even in extortion-only variants, to maintain leverage.

ProcessCmd contains anycase "vssadmin delete shadows" OR ProcessCmd contains anycase "wbadmin delete catalog" OR ProcessCmd contains anycase "bcdedit /set {default} recoveryenabled No"

Lateral Movement (RDP & PsExec)

Karma prioritizes RDP vulnerabilities and PsExec for spreading across the network.

ProcessCmd contains anycase "psexec" OR (Tactic = "Lateral Movement" AND NetworkService = "RDP")

Splunk

Look for unusual large file transfers or network activity from unexpected hosts (e.g., a standard user workstation transferring gigabytes of data to a public cloud service).

index=* sourcetype="<network_logs>" | stats sum(bytes_out) as total_bytes by dest_ip, src_user | where total_bytes > <threshold>

Multiple Failed Logins (Brute Force): Identify potential credential stuffing or brute force across multiple systems.

index=* sourcetype="WinEventLog:Security" EventCode=4625 | stats count by src_ip, user | where count > <threshold> | table src_ip, user, count

Track attempts to disable built-in recovery features.

index=* sourcetype="WinEventLog:Security" EventCode=4688 | where New_Process_Name="bcdedit.exe" AND (CommandLine="*recoveryenabled No*" OR CommandLine="*safemode*")

Look for a batch file spawning PowerShell, which in turn performs suspicious actions.

index=* sourcetype="WinEventLog:Security" EventCode=4688 | where Parent_Process_Name="cmd.exe" AND New_Process_Name="powershell.exe"

Delivery Methods

·       Phishing with malicious HTML attachments ("HOW_TO_RECOVER_DATA.html").

Email Samples

Subject

·       "URGENT: Legal documentation regarding [Organization Name] data breach"

Attachment

·       HOW_TO_RECOVER_DATA.html

References

Cyfirma

·       hxxps://www.cyfirma.com/news/weekly-intelligence-report-16-january-2026/

Bitdefender

·       hxxps://www.bitdefender.com/en-us/blog/businessinsights/bitdefender-threat-debrief-january-2026

VirusTotal

·       hxxps://www.virustotal.com/gui/file/4dec9a9044631caef283c7f39a576e4e5c1cc1e6a97ce5c60936a3a3d0097818