Iran-Linked MuddyWater Poses as Ransomware Gang to Mask Cyber Espionage
NCC Group reports that Iran-linked MuddyWater is masquerading as the Chaos ransomware gang to conceal cyber espionage operations, blurring the line between criminal and state-backed activity.
The line between ransomware activity and nation-state backed cyber campaigns is blurring, as state-sponsored cyber espionage groups adopt tools and techniques associated with cyber criminals to disguise their intelligence operations, a report has warned.
Analysis by cybersecurity researchers at NCC Group has described how MuddyWater, a hacking and cyber espionage group associated with Iran’s Ministry of Intelligence and Security, posed as the Chaos ransomware group to hide its espionage activity. The findings were published in the NCC Group Monthly Threat Pulse on June 24.
This is not the first time a state-backed group has attempted to disguise its activity as that of a cybercrime gang, but in this case, MuddyWater put significant effort into making their espionage activity appear as if it was genuinely a financially motivated attack by Chaos. Elements of this included how the MuddyWater operators incorporated extortion notes, victim negotiation channels and a listing on the Chaos leak site to reinforce a more persuasive appearance of a financially motivated intrusion.
“Historically, organizations could draw a relatively clear distinction between ransomware attacks driven by financial gain and nation-state operations designed to support strategic objectives. That distinction is becoming increasingly difficult to make,” said Matt Hull, VP of cyber intelligence and response at NCC Group. “What we're seeing is a convergence of criminal and state-backed activity. Threat actors are sharing infrastructure, adopting common tooling and, in some cases, deliberately operating behind established ransomware brands to obscure attribution and delay response efforts,” he added.
MuddyWater is not the only threat group which has adopted this obfuscation technique. The report detailed how 2026 has seen several Iran-linked threat actors leveraging cybercriminal operational models, off-the-shelf tools and infrastructure hosted by cybercriminals to conduct state-sponsored hacking. The report also noted how one Iranian state-backed group has been observed working with Russian cybercriminals to deploy a remote access trojan available for purchase on the dark web against espionage targets. Meanwhile, China, Russia and North Korea state-backed operations have all leveraged ransomware-as-a-service campaigns as a front for cyber espionage, data exfiltration and other attacks.
As well as providing an avenue to gather intelligence, the deployment of cybercriminal-style tools and tactics also creates a level of plausible deniability for the attackers. This has implications for enterprises and other organizations who fall victim to attacks. “This creates a more complex threat environment. Organizations can no longer assume a ransomware incident is purely financially motivated. Understanding an adversary’s behavior, objectives and operational context is becoming just as important as identifying the malware or ransomware group involved,” said Hull.
To help organizations and security operation centers who might face these threats identify and react to them, the NCC Group paper recommended that mature defensive strategies should prioritize behavioral analysis, operational context, observed tradecraft and adversary objectives over signature-based artefacts.