Months before its technology became the centerpiece of Samsung’s new mobile payment system, LoopPay, a small Massachusetts subsidiary of the South Korean electronics giant, was the target of a sophisticated attack by a group of government-affiliated Chinese hackers.
As early as March, the hackers — alternatively known as the Codoso Group or Sunshock Group by those who track them — had breached the computer network of LoopPay, a start-up in Burlington, Mass., that was acquired by Samsung in February for more than $250 million, according to several people briefed on the still-unfolding investigation, as well as Samsung and LoopPay executives.
LoopPay executives said the Codoso hackers appeared to have been after the company’s technology, known as magnetic secure transmission, or MST, which is a key part of the Samsung Pay mobile payment wallet that made its public debut in the United States last week.
Like similar mobile payment systems from Apple and Google, Samsung Pay allows consumers to pay for goods using their Samsung smartphones with so-called near-field communications technology, which uses a wireless signal to send payment information from a phone to newer cash registers. But LoopPay’s MST technology has an advantage: It also works with older payment systems by emulating a commonly used magnetic stripe card.
The attackers are believed to have broken into LoopPay’s corporate network, but not the production system that helps manage payments, said Will Graylin, LoopPay’s chief executive and co-general manager of Samsung Pay. Mr. Graylin said that security experts were still looking through LoopPay’s systems, but that there had been no indication that the hackers infiltrated Samsung’s systems or that consumer data had been exposed.