The Iran-linked APT actor MuddyWater has been observed performing an intrusion masquerading as a ransomware attack, Rapid7 reports.
As part of the intrusion observed in early 2026, the attackers relied on social engineering for initial access and performed operations typically associated with espionage campaigns, including reconnaissance, credential harvesting, and data theft, but did not deploy file-encrypting ransomware.
The threat actors engaged with the victim organization’s employees via Microsoft Teams, establishing screen-sharing sessions for access to users’ assets. This allowed them to steal credentials, manipulate MFA protections, and compromise accounts.
“While connected, the TA executed basic discovery commands, accessed files related to the victim’s VPN configuration, and instructed users to enter their credentials into locally created text files. In at least one instance, the TA also deployed a remote management tool (AnyDesk) to further facilitate access,” Rapid7 says.
Next, the attackers established persistent access through RDP sessions and the DWAgent remote access tool. Using the access, the hackers deployed additional payloads, moved laterally through the environment, and harvested and exfiltrated information.
Finally, the threat actors sent emails to multiple users for extortion, claiming to have stolen information and threatening to leak it unless a ransom was paid.
The victim was directed to the Chaos ransomware’s leak site, which listed the targeted organization as a new victim. A subsequent email instructed the recipients to locate a ‘note’ containing credentials to a secure chat to continue negotiations, but the note was never found and the stolen data was leaked online.
Throughout the intrusion, the attackers never deployed file-encrypting ransomware on the compromised machines, suggesting that Chaos artifacts were planted as false flags to hide the state-sponsored activity.
“The inclusion of extortion and negotiation elements could serve to focus defensive efforts on immediate impact, likely delaying the identification of underlying persistence mechanisms established via remote access tools such as DWAgent or AnyDesk,” Rapid7 notes.
Additionally, the infrastructure used in the attack was previously linked to MuddyWater, an APT also known as Mango Sandstorm, Mercury, Seedworm, and Static Kitten, and officially linked by the US to the Iranian Ministry of Intelligence and Security (MOIS).
As part of the attack, the threat actor deployed a custom RAT dubbed Darkcomp (Game.exe), which supports command execution, file manipulation, and persistent shell execution.
The backdoor is signed with a certificate linked to MuddyWater’s previous operations and uses a command-and-control (C&C) domain also associated with the Iranian threat actor. The social engineering tactic and the malware execution flow are also consistent with previously observed MuddyWater activity.
“The convergence of technical and contextual evidence is consistent with attribution to MuddyWater with moderate confidence. The observed use of Chaos ransomware does not indicate a shift in the group’s underlying objectives, but rather reflects a consistent effort to obscure operational intent and complicate attribution,” Rapid7 notes.
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