Update: Chinese team mistakenly released unpatched IE7 exploit

IDG News Service - Chinese security researchers mistakenly released the code needed to hack a PC by exploiting an unpatched vulnerability in Microsoft Corp.'s Internet Explorer 7 (IE7) browser, potentially putting millions of computer users at risk -- but it appears some hackers already knew how to exploit the flaw.

At one point, the code was traded for as much as $15,000 on underground criminal markets, according to iDefense, the computer security branch of VeriSign Inc., citing a blog post from the Chinese team.

The problem in IE7 means a computer could be infected with malicious software merely by visiting a Web site, one of the most dangerous computer security scenarios. It affects computers running IE7 on Windows XP, regardless of the service pack version.

Microsoft has acknowledged the issue but has not indicated when it will release a patch.

The vulnerability was first revealed earlier this week by the Chinese security team Knownsec. It said on Tuesday it mistakenly released exploit code thinking that the problem was already patched, iDefense said.

"This is our mistake," Knownsec said in a Chinese-language research note.

That mistake could mean that more hackers will try to build Web sites in order to compromise users' PCs, since the exploit code is more freely floating around on the Internet. However, other information indicates that hackers already knew how it worked before the release. According to Knownsec, a rumor surfaced earlier in the year about a bug in Internet Explorer, iDefense wrote.

Information on the vulnerability was allegedly sold in November on the underground black market for $15,000. Earlier this month, the exploit was sold second- or thirdhand for $650, said iDefense, citing Knownsec.

Eventually, someone developed a Trojan horse program -- one that appears harmless but is actually malicious -- that is designed to steal information related to Chinese-language PC games, a popular target for hackers.

Now, other Web sites are being built that incorporate the exploit. Hackers then usually try to get people to visit those sites through spam or unsolicited instant messages.

iDefense said in a note that the vulnerability is "really nasty" and that computer security professionals could be in for a rough ride.

Researchers are also seeing hackers incorporate the IE7 exploit into Web sites that have been compromised by the so-called SQL injection attacks.