Jose Vildoza’s 62-year-old father was using his old Windows computer when a warning in broken English flashed on the screen: your files have been encrypted.

Vildoza’s father, who speaks Spanish, didn’t understand the warning, which demanded payment in order to decrypt the files. When Vildoza looked at it, he knew it was bad. And he became angry.

“I became upset with that,” said Vildoza, who lives in the small town of Bella Vista, Argentina, and works for Tucma Games, a video game developer. “I didn’t want to pay.”

Jose Vildoza.

Vildoza’s machine had become just one of the latest victims of a long-running scam that has seen a surprising resurgence over the last year. For around a decade, cybercriminals have been hacking people’s computers and encrypting their files.

It’s one of the more insidious schemes on the Internet. The type of encryption is virtually unbreakable, and unless users have a backup of their files on an uninfected machine, the data—absent payment—is gone for good.

In its latest Internet Security Threat Report released on Tuesday, security vendor Symantec said it saw a 500 percent increase in the number of attempts across its customer base in 2013 to install encrypting malware, under names including CryptoLocker, CryptorBit and HowDecrypt.

The hackers typically demand $100 to $500, payable in bitcoin or other Web-based payment services. The ransom may increase the longer the victim waits.

Kevin Haley, director of Symantec’s security response team, said Wednesday “it’s the perfect kind of criminal scam. You get people scared and not thinking, and you can make a lot of money out of it.”

Ransomware schemes may be rising due to the sheer profitability and declining effectiveness of Web-based scams such as bogus security programs. Haley said Symantec estimates ransomware perpetrators on an average achieve a 3 percent response rate, and demand payment that is much higher than those peddling fake AV software, typically $50.

But Vildoza, an enthusiastic 25-year-old, wasn’t about to give up. He launched his own investigation, discovering that his machine had first been infected with Sefnit, which is a malware behind a botnet, or a network of compromised computers, by the same name.

He believes that whoever controls Sefnit likely sold access to his computer to other cybercriminals who then installed CryptoDefense, a type of ransomware that emerged last month.

The CryptoDefense ransomeware. (Click to enlarge.)

Diving into CryptoDefense’s code, he found its developers had made a crucial mistake. CryptoDefense used Microsoft’s Data Protection API (application programming interface), a tool in the Windows operating system to encrypt a user’s data.

CryptoDefense sent the plain-text private key to unlock the data back to its own server, and the cybercriminals would only release it upon payment. But they apparently didn’t know that the Data Protection API stored a copy of the encryption keys on a victim’s computer.

The problem, though, is that the keys as stored on the user’s system were encrypted. He and a researcher, Fabian Wosar of the Austrian security company Emsisoft, collaborated on a utility called the Emsisoft Decrypter that could recover the encrypted keys.

Vildoza knew he had made a big discovery, and one that would help a lot of people. In mid-March he had launched a blog chronicling his investigation, including an email address to request assistance.

At the time, he purposely withheld revealing the mistake CryptoDefense’s authors had made on his blog. But Symantec then published a blog post on March 31 detailing the error.

Symantec’s post described the file path where the keys were stored. But then around two days later, Symantec deleted that specific information.

Haley said the company had second thoughts about dribbling that bit of information since most users unfamiliar with RSA encryption wouldn’t know what to do with it.

“I think while we thought it was technically accurate, we figured out it wasn’t enough to really help anyone,” Haley said. “The impression we left people was you could follow that, get the key and you’re good to go.”

Vildoza and Wosar's Emisoft Decrypter. (Click to enlarge.)

He said people could have called Symantec’s technical support for more information but acknowledged those people would have to be the company’s customers.

After Symantec’s post, Vildoza went ahead and described the problem on his blog. He received at least 80 emails asking for help, as well as unmanageable flood of spam, presumably as revenge from CryptoDefense’s operators, who he suspects are Russian.

After the coding error in CryptoDefense became public, the malware authors fixed it, once again making the malware an intractable problem for those infected.

Haley said he understood the argument for keeping the mistake quiet. But the cybercriminals would have figured “it out eventually and closed that loop,” he said.

The utility developed by Vildoza and Wosar only works for versions of CryptoDefense that infected machines prior to March 31. But it still has helped many people.

Dan Getty, who is responsible for desktop patch management at the University of Michigan in Flint, said CryptoDefense infected two computers, including one of an administrator that contained thousands of files which were not backed up.

“The loss would have been catastrophic,” he said via email.

Michael Van Rheenen, director of development for the online software company Tallyfox in Zurich, wrote via email that he briefly considered paying the ransom after three computers and a storage drive were infected.

But the “absurd abuse” aspect of the attack “led me to keep searching for a possible solution for it,” Van Rheenen wrote. He eventually recovered 5,675 files, ranging from documents to photos, none of which had been backed up.

Marshall Shapiro, who lives in San Jose, California, removed the infected hard drive of a computer his wife had been using when it locked up. The hard drive is still in the closet while he mulls trying to see if the utility from Vildoza and Wosar will work.

“Why the hell pay these bastards?” said Shapiro, who worked for 15 years doing technical support for hardware security modules. “I don’t know if my wife’s files are that valuable at this point.”

“She’s getting mad at me saying that,” said Shapiro, who noted during a phone interview that his wife was in the room.