Iranian government-sponsored threat actors have been blamed for compromising a U.S. federal agency by taking advantage of the Log4Shell vulnerability in an unpatched VMware Horizon server.

The details, which were shared by the U.S. Cybersecurity and Infrastructure Security Agency (CISA), come in response to incident response efforts undertaken by the authority from mid-June through mid-July 2022.

"Cyber threat actors exploited the Log4Shell vulnerability in an unpatched VMware Horizon server, installed XMRig crypto mining software, moved laterally to the domain controller (DC), compromised credentials, and then implanted Ngrok reverse proxies on several hosts to maintain persistence," CISA noted.

LogShell, aka CVE-2021-44228, is a critical remote code execution flaw in the widely-used Apache Log4j Java-based logging library. It was addressed by the open source project maintainers in December 2021.

The latest development marks the continued abuse of the Log4j vulnerabilities in VMware Horizon servers by Iranian state-sponsored groups since the start of the year. CISA did not attribute the event to a particular hacking group.

However, a joint advisory released by Australia, Canada, the U.K., and the U.S. in September 2022 pointed fingers at Iran's Islamic Revolutionary Guard Corps (IRGC) for leveraging the shortcomings of post-exploitation activities.

The affected organization, per CISA, is believed to have been breached as early as February 2022 by weaponizing the vulnerability to add a new exclusion rule to Windows Defender that allowlisted the entire C:\ drive.

Doing so made it possible for the adversary to download a PowerShell script without triggering any antivirus scans, which, in turn, retrieved the XMRig cryptocurrency mining software hosted on a remote server in the form of a ZIP archive file.

The initial access further afforded the actors to fetch additional files such as PsExec, Mimikatz, and Ngrok, in addition to using RDP for lateral movement and disabling Windows Defender on the endpoints.

"The threat actors also changed the password for the local administrator account on several hosts as a backup should the rogue domain administrator account get detected and terminated," CISA noted.

Also detected was an unsuccessful attempt at dumping the Local Security Authority Subsystem Service (LSASS) process using the Windows Task Manager, which was blocked by the antivirus solution deployed in the IT environment.

Microsoft, in a report last month, revealed that cybercriminals are targeting credentials in the LSASS process owing to the fact that it "can store not only a current user's OS credentials but also a domain admin's."

"Dumping LSASS credentials is important for attackers because if they successfully dump domain passwords, they can, for example, then use legitimate tools such as PsExec or Windows Management Instrumentation (WMI) to move laterally across the network," the tech giant said.