A new Trojan horse masquerading as a video "codec" required to view content on certain Web sites tries to change key settings on the victim's Internet router so that all of the victim's Web traffic is routed through servers controlled by the attackers.

According to researchers contacted by Security Fix, recent versions of the ubiquitous "Zlob" Trojan (also known as DNSChanger) will check to see if the victim uses a wireless or wired hardware router. If so, it tries to guess the password needed to administer the router by consulting a built-in list of default router username/password combinations. If successful, the malware alters the victim's domain name system (DNS) records so that all future traffic passes through the attacker's network first. DNS can be thought of as the Internet's phone book, translating human-friendly names like example.com into numeric addresses that are easier for networking equipment to handle.

While researchers have long warned that threats against hardware routers could one day be incorporated into malicious software, this appears to be the first time this behavior has been spotted in malware released into the wild.

The type of functionality incorporated into this version of the Zlob Trojan is extremely concerning for a number of reasons. First, Zlob is among the most common type of Trojan downloaded onto Windows machines. According to Microsoft, the company's malicious software removal tool zapped some 14.3 million instances of Zlob-related malware from customer machines in the second half of 2007.

The other, more important reason this shift is scary is that a Windows user with a machine infected with a Zlob/DNSChanger variant may succeed in cleaning the malware off an infected computer completely, but still leave the network compromised. Few regular PC users (or even PC technicians) think to look to the router settings, provided the customer's Internet connection is functioning fine.

Philip Sloss, a software engineer for myNetwatchman.com, said he first observed the activity while examining a Zlob variant distributed on May 22. The DNS hijack occurs, he said, during the installer program, so by the time the user sees the fake codec installer screen, the malware has already attempted to change DNS settings on the victim's router.

I reached out to researchers at Sunbelt Software to check Sloss's data, and Sunbelt was able to confirm that the malware successfully changed the DNS settings on a Linksys router (model BEFSX41), pulled straight out of the factory box (with the default username and password). Another test showed that the Zlob variant successfully changed the DNS settings on a Buffalo router running the DD-WRT open source firmware.

Sunbelt also found that if there are multiple machines using the same router, all of the systems connected to that router will have their traffic hijacked.

"This is definitely something we have not seen before," said Eric Sites, chief technology officer at Sunbelt. Sites said his team is testing the new Zlob variants against multiple routers to see how they fare against the malware. "It was only a matter of time before someone started using this attack."