Court slams Bottle Domains' lax security

Registrar stored credit cards in unencrypted format.

The Victorian Supreme Court has chastised Bottle Domains for its "extraordinary indifference to the effect of credit card fraud on its victims" over attempts to downplay to customers the seriousness of a security breach.

The domain registrar had its accreditation terminated by the domain name regulator auDA in April when it emerged the company didn't disclose a 2007 security breach. 

iTnews has contacted Bottle owner Nicholas Bolton for comment.

The incident came to light after Bottle Domains suffered a more serious incident last January in which its database was hacked and sold on the internet.

AuDA said Bottle's failure to notify it at the time of the earlier incidents breached its obligations and was grounds for termination of its registrar agreement, which would mean Bottle would no longer be able to sell domain names or continue trading as a domain name registrar.

The court upheld that termination in a ruling released last Friday. Final orders were due this Wednesday.

In the ruling, Justice Hargrave criticised Bolton for "seeking to downplay any risk that credit card information had been or may be fraudulently used" as a result of this year's hack.

The court found Bolton amended the text of an email to be sent to customers after it was approved by the domain regulator.

The "defective email" referred to in Hargrave's ruling "omitted the paragraph recommending that registrants remain vigilant and monitor their domains, accounts and credit card transactions".

Bolton said the email was sent as a result of a "cut-and-paste error", an explanation the court ruled was "improbable".

The court said Bolton "was obviously concerned that any notice to registrants should describe the 2009 security breach, and the extent of the consequent risks to registrants, in moderate terms".

"He [Bolton] acknowledged that it was his consistent position that no warning should be given to registrants concerning the possible misuse of their credit card details until further information was received from the [Australian Federal Police] as to the likely number of credit cards affected," the ruling said.

"I find that the principal reason for Mr Bolton's opposition to registrants receiving a warning that their credit card details may have been misused was his desire to retain the business of registrants."

The ruling also paraphrased Bolton as saying "warning registrants about possible credit card fraud was ‘not a time-sensitive matter because they can address it retrospectively'."

"This evidence was based upon his understanding that credit card customers are completely indemnified against misuse of their credit cards because the ultimate liability falls upon the vendor of goods and services in the relevant transaction, the issuing bank or an insurance company," the ruling said.

"This ignores the inconvenience to the defrauded registrant and the interests of other participants in the Australian internet community, which auDA is charged to protect.

"It also fails to give sufficient weight to the fact that the credit card details of registrants were stored on [Bottle parent] Australian Style's database in an unencrypted format."

In a further example, the Court detailed a request from the Federal Police to Bolton for a list of credit card details held on Australian Style and Domain Central databases.

Domain Central is another registrar owned by Australian Style.

"The purpose of the request was to provide the credit card numbers to the issuing banks so that they could mitigate any risk to their customers," the ruling said.

"Mr Bolton did not immediately agree to provide the credit card numbers.

"He first raised some concerns that the Privacy Act 1988 may prevent the provision of the information. He then sought to see a copy of the covering correspondence to be sent by the AFP to the issuing banks.

"He made some suggestions to the AFP to modify this proposed correspondence, by having the AFP stipulate that only some of the credit card information may have fallen into illegitimate hands."

The court described the Privacy Act concerns as "disingenuous".

A review of Australian Style's security systems undertaken by Vectra Corporation after this year's breach "identified a number of significant vulnerabilities in those systems and recommended actions by Australian Style to address those vulnerabilities".