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How RaccoonO365 Weaponized Cloudflare and Telegram to Industrialize Microsoft 365 Credential Theft

A threat-intel deep dive into the phishing-as-a-service model, the infrastructure tricks (Cloudflare), the operator workflow (Telegram), and the concrete defenses security teams should deploy now.

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TL;DR (Executive Summary)

RaccoonO365 is a phishing-as-a-service (PhaaS) ecosystem built to steal Microsoft 365 credentials at scale, lowering the barrier for criminals through subscription tooling and automated operator workflows.
Defenders observed heavy use of Cloudflare anti-bot and web-layer features to reduce sandboxes/bots and increase “human-only” victim success rates, including CAPTCHA and browser checks. (See analysis in public reporting.)
Operators often rely on Telegram (and similar channels) for fast, mobile-first campaign operations: alerts, delivery of stolen credentials, and coordination.
Microsoft’s Digital Crimes Unit (DCU), working with partners, disrupted RaccoonO365 infrastructure by seizing 338 websites/domains tied to the operation in September 2025. This reduced availability but did not eliminate the underlying criminal model. Source: Microsoft DCU.
Your practical defense: phishing-resistant MFA, conditional access hardening, OAuth/app governance, token/credential theft detection, and aggressive user-risk controls—with SOC playbooks designed specifically for PhaaS-era cloud identity abuse.

1) Context: Why RaccoonO365 Matters

Microsoft 365 identity is now a primary attack surface. Email access, Teams access, SharePoint and OneDrive data, and OAuth app permissions are the modern “keys to the kingdom.” Criminal groups don’t need a sophisticated exploit chain when a stolen credential (or token) can provide the same end result: internal access, data theft, invoice fraud, lateral movement, and extortion.

RaccoonO365 is notable because it represents the productization of credential theft: operators buy access to a kit, follow playbooks, and run campaigns with conversion optimization. In September 2025, Microsoft’s Digital Crimes Unit (DCU) publicly said it disrupted RaccoonO365 by seizing 338 websites/domains associated with the operation through a court order, cutting off access to technical infrastructure used by criminals. This is one of the clearest public data points demonstrating the scale and maturity of the service model. (Microsoft DCU reporting.)

Fast-forward: the broader market of phishing-as-a-service continues to thrive. Even when one infrastructure set is disrupted, attackers iterate: they rotate domains, copy techniques, and reassemble their toolchains. Your defensive strategy cannot be “block one domain.” It must be identity-first and behavior-driven.

2) PhaaS 101: The Industrial Model Behind Modern Phishing

Phishing-as-a-service (PhaaS) turns credential theft into a subscription product. Instead of every criminal building their own infrastructure and crafting pages, a PhaaS vendor provides: hosted templates, management panels, telemetry, bot filtering, credential capture workflows, and often playbooks for delivery and evasion.

In the RaccoonO365 case, public reporting describes it as a fast-growing credential theft service targeting Microsoft 365 accounts, with takedown and disruption efforts involving Microsoft and partners. Multiple outlets covered the same disruption timeline and the concept of this being a PhaaS toolkit rather than a single one-off “campaign.”

The defensive implication is direct: you are fighting not only a threat actor but a supply chain. A single “kit” can power hundreds of actors, thousands of emails, and a rapidly changing domain footprint. This is why identity telemetry, conditional access, user risk scoring, and token theft detections matter more than static IOC lists.

3) How Cloudflare Gets Weaponized in Credential Theft Campaigns

Cloudflare is not “the attacker.” Cloudflare is a legitimate internet security and performance platform. But criminals abuse legitimate infrastructure everywhere: VPS providers, CDNs, URL shorteners, cloud object storage, and messaging platforms. The question is how the features get repurposed.

Public technical analysis of RaccoonO365-linked pages notes the use of anti-bot and automation detection tactics, including Cloudflare Turnstile CAPTCHA and browser feature checks to filter out non-human traffic. The goal is simple: reduce security researchers, sandboxes, and automated crawlers; increase successful credential capture against real users. (See third-party script analysis reporting.)

For defenders, this changes the investigation flow. When you see a suspicious login page that looks like Microsoft, it may also be wrapped in “legitimate-looking” layers: CAPTCHA, “checking your browser” gates, and geo/IP reputation checks. Those layers can break simplistic automated scanning and delay detection. That delay is an advantage for criminals.

Defensive takeaway: treat “CAPTCHA presence” as neutral. A CAPTCHA does not prove legitimacy. Many modern phishing kits intentionally add CAPTCHA and fingerprinting to mimic trust and reduce analysis. Your controls must detect credential theft outcomes (impossible travel, token anomalies, risky sign-ins, mailbox rule creation, OAuth consent abuse) rather than assume “protected by Cloudflare” equals safe.

4) How Telegram Fits the Operator Workflow

Telegram is widely used for legitimate communities, but it is also popular with cybercriminals because it’s fast, mobile-friendly, supports large channels/groups, and can integrate bots for automation. In practice, criminal operations use Telegram to receive “hits,” share stolen credentials, coordinate targeting, and manage kit subscriptions. Public reporting on RaccoonO365-associated enforcement actions describes ongoing law enforcement activity, including arrests tied to alleged developers, reflecting how real and organized these ecosystems are.

The defensive implication is not “block Telegram globally” (often unrealistic), but to recognize that exfiltration and operator coordination are now real-time and distributed. You need fast incident response: lock accounts, revoke sessions, kill OAuth tokens, check mailbox rules, search for persistence, and validate sign-in logs.

5) Attack Chain: What a Typical RaccoonO365-Style Flow Looks Like

Lure delivery: email or message with urgent business context (invoice, shared file, HR doc, password reset).
Landing page: a Microsoft-themed sign-in prompt; may include CAPTCHA/anti-bot checks.
Credential capture: username/password entered; sometimes additional prompts to defeat MFA via social engineering or relay.
Immediate validation: the kit can test credentials quickly and request additional inputs if needed.
Operator alerting: stolen credentials delivered to operators rapidly (often via messaging workflows).
Account takeover actions: mailbox access, data download, MFA changes if possible, adding forwarding rules, creating OAuth grants, or pivoting into internal apps.
Monetization: BEC/invoice fraud, extortion, data sale, ransomware staging, or identity-based lateral movement.

This article does not provide “how to run” phishing steps. The focus is defensive: what to detect and how to stop the chain. The key insight is timing: the window between capture and abuse can be minutes. Your playbooks must be optimized for speed.

6) Detections: SOC Signals, Queries, and Practical Telemetry

Because PhaaS infrastructure changes rapidly, high-value detection focuses on identity signals and suspicious post-auth behavior. Your SOC should monitor Microsoft Entra ID (Azure AD) sign-ins, risky sign-ins, conditional access outcomes, mailbox operations, OAuth consent events, and session/token anomalies.

6.1 High-signal identity events

Impossible travel / atypical location sign-ins for the same user within a short time window.
New device / new IP with rapid follow-on access to email, SharePoint, OneDrive, or admin portals.
Repeated failed sign-ins followed by success from a different ASN or geography.
New MFA methods added or MFA settings changed soon after suspicious sign-in.
Consent to new OAuth apps or permission grants that do not match business usage.

6.2 Post-compromise signals in M365

Mailbox forwarding rules created or modified, especially to external domains.
Inbox rules that hide replies or auto-delete security notifications.
Mass downloads from OneDrive/SharePoint immediately after a risky sign-in.
New admin roles, privilege escalation attempts, or privileged app registrations.
Unusual Teams/Outlook activity such as bulk searches or exports outside normal hours.

6.3 Practical “what to log” checklist

Entra ID Sign-in Logs + Audit Logs (retain longer if possible)
Conditional Access insights (policy hits, blocks, MFA prompts, session controls)
Defender for Office 365 phishing detections and URL detonation results
Defender for Cloud Apps activity logs (OAuth app governance, unusual downloads)
Exchange Online audit logs (rules, forwarding, mailbox permissions)
Endpoint telemetry (browser artifacts, downloaded payloads, suspicious extensions)

7) Defensive Playbook: Hardening, Policy, User Risk, and IR

7.1 Harden identity for phishing resistance

Move privileged users (and ideally all users) to phishing-resistant MFA (FIDO2/security keys or certificate-based auth where feasible).
Enforce Conditional Access: block legacy auth, require compliant device for sensitive apps, enforce risk-based prompts.
Use number matching / strong MFA UX and disable weak factors if your environment allows.
Restrict and monitor OAuth app consent; require admin consent for high-privilege scopes.

7.2 Reduce blast radius and speed up containment

Enable automated response: when risky sign-in is detected, trigger session revoke + password reset workflow.
Pre-build IR actions: disable user, revoke refresh tokens, reset MFA, remove inbox rules, check forwarding, inspect OAuth grants.
Protect admins: separate admin accounts, enforce PIM, and require device compliance for admin portals.

7.3 User awareness that matches 2025 reality

Training must evolve past “don’t click links.” Teach users to recognize suspicious sign-in prompts, verify file-share requests, and use trusted entry points (bookmarks, typed URLs, or corporate portals). Emphasize that CAPTCHA pages can be malicious.

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8) IOC Guidance: What to Capture (Without Guessing Indicators)

For campaigns like RaccoonO365, hardcoding a single IOC list inside an article quickly becomes inaccurate because domains and paths rotate. Instead, capture and hunt on patterns and high-confidence artifacts from your own telemetry.

IOC Collection Checklist

Phishing URL(s) from user reports (full URL including path/query)
Redirect chain (all intermediate domains)
Landing page HTML snapshot (for internal analysis)
Source IPs from sign-in logs + user agent strings
Mailbox rule changes, forwarding addresses, OAuth consent events
File access patterns immediately after suspicious sign-in

9) 30–60–90 Day Security Plan

First 30 Days (Stop the bleeding)

Enforce Conditional Access for Microsoft 365 high-risk access paths (admin portals, email, SharePoint).
Block legacy auth; require MFA and strengthen MFA methods for privileged roles first.
Turn on and retain audit logs; validate that mailbox rule changes are monitored.
Build a rapid response runbook: disable user, revoke sessions, reset MFA, remove rules, review OAuth grants.

Day 31–60 (Make it measurable)

Deploy phishing-resistant MFA for admins and high-risk business units.
Implement user risk scoring workflows (risk-based CA policies, user education triggers).
Centralize logs in SIEM; create alerts for impossible travel, mass downloads, mailbox forwarding rules.
Harden OAuth app governance and restrict consent.

Day 61–90 (Operational maturity)

Run tabletop exercises for “credential theft + mailbox rule persistence + BEC attempt.”
Automate containment actions for high-confidence alerts.
Improve user reporting pipeline and SOC triage SLAs.
Review supplier/partner access and enforce stronger identity controls on shared tenants.

Next Reads (CyberDudeBivash Internal Links)

Add 3–7 internal links here to related CyberDudeBivash posts on phishing, M365 security, identity hardening, and SOC detections.

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10) FAQ

Is Cloudflare the attacker?

No. Cloudflare provides legitimate security and performance services. Criminals abuse legitimate services across the internet. The defensive lesson is to monitor identity outcomes and suspicious behavior, not to assume a site is safe because it uses a reputable CDN.

What is the fastest way to stop credential phishing impact?

Deploy phishing-resistant MFA for high-value accounts, enforce strong Conditional Access, and automate rapid response: revoke sessions, reset credentials/MFA, remove mailbox rules, and review OAuth grants immediately after risky sign-ins.

Did RaccoonO365 get taken down permanently?

Microsoft reported disruption actions including seizing 338 domains/sites tied to the operation, but the PhaaS business model persists broadly, and copycats and rebuilds are common. Treat takedowns as a temporary reduction in activity, not a permanent end.

References

Microsoft DCU blog (Sept 16, 2025): Disruption of RaccoonO365 infrastructure and seizure of 338 websites/domains. (Reference for the disruption claim.)
Help Net Security (Sept 2025): Coverage of Microsoft + Cloudflare disruption of RaccoonO365 and attribution discussion.
Third-party script analysis (Nov 2024): Notes on Cloudflare Turnstile CAPTCHA and automation detection on RaccoonO365-linked pages.
The Record (Dec 2025): Reporting on arrests tied to alleged RaccoonO365 kit development, based on law enforcement statements.
The Hacker News (Sept 2025): Summary coverage of the takedown/disruption and scale discussion.

Verification sources used for this article: Microsoft official blog and multiple security media reports.

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