Yahoo "knew" about 2014 hack before Verizon deal

James Pearce
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In a government filing, internet firm has admitted some staff were aware of state sponsored hack more than two years ago

Major doubts have been cast on the proposed $4.8 billion Verizon takeover Yahoo after the media company admitted it had some awareness of a massive data breach prior to agreeing the deal.

Yahoo was hit by a “state-sponsored” hack in 2014, with more than 500 million customer accounts accessed. When it first announced the hack, it said it had been uncovered as part of a “recent investigation”.

In a filing with the US Securities and Exchange Commission, Yahoo admitted that it had identified a hack from a “state-sponsored actor” in “late 2014”.

The filing throws up doubt about Verizon’s proposed takeover, announced in June, due to a clause in the takeover agreement that relates to knowledge of any data breaches.

The text is in a takeover agreement dated 23 July 2016 which was uncovered by Fortune once news of the hack broke in September.

"To the Knowledge of Seller, there have not been any incidents of, or third party claims alleging, (i) Security Breaches, unauthorized access or unauthorized use of any of Seller’s or the Business Subsidiaries’ information technology systems or (ii) loss, theft, unauthorized access or acquisition, modification, disclosure, corruption, or other misuse of any Personal Data in Seller’s or the Business Subsidiaries’ possession, or other confidential data owned by Seller or the Business Subsidiaries (or provided to Seller or the Business Subsidiaries by their customers) in Seller’s or the Business Subsidiaries’ possession, in each case (i) and (ii) that could reasonably be expected to have a Business Material Adverse Effect."

At the time, Verizon said it was only informed of the breach two days prior to Yahoo’s announcement about it. The telecoms firm has since sought to reduce the cost of the deal by around $1 billion, according to the New York Times.

In its filing, Yahoo indicates that it discovered the data had been stolen after it looked into another unsubstantiated claim. This, it said, led it to intensify “an ongoing broader review” and re-examine “access to the company’s network by a state-sponsored actor” first noticed in 2014.

Citing figures close to the matter, the Financial Times said Yahoo did not have a “full picture” of the hack due to its “sophisticated nature”.

Verizon has already stated that it has reasonable grounds to believe the hack could have a “material” impact on its deal.