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FBI Raids Chinese Tech Company in Florida Following Unusual Technical Behaviors

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Published: November 1, 2021
NEW YORK, NEW YORK - NOV. 26: Members of the FBI patrol the 94th Annual Macy's Thanksgiving Day Parade on Nov. 26, 2020 in New York City. (Image: Roy Rochlin/Getty Images)

The Florida offices of Pax Global Technology (Pax), a Chinese point-of-sale device maker, were recently raided by the FBI and other U.S. agencies. The company’s devices are used by millions of retailers and other businesses worldwide. The raid is believed to have been prompted due to security concerns regarding Pax’s products.

The investigation involved the Jacksonville division of the FBI, Homeland Security Investigations, Department of Commerce, Customs and Border Protection, and Naval Criminal Investigative Services. The Jacksonville Sheriff’s office also provided support. 

The raid was conducted as part of a “court-authorized search in furtherance of a federal investigation,” one FBI official told the BBC. In total, three Pax facilities in Jacksonville were searched. The investigation is considered “ongoing.”

The company has denied that it is involved in any wrongdoing. “Pax Technology takes security very seriously… As always, Pax Technology is actively monitoring its environment for possible threats… We remain committed to providing secure and quality software systems and solutions… Pax Technology is not aware of any illegal conduct by it or its employees and is in the process of engaging counsel to assist in learning more about the events that led to the investigation,” the company said.

According to KrebsOnSecurity, the FBI started investigating Pax after a major payment processor began questioning the presence of unusual network packets in the company’s payment terminals. The payment processor discovered that the terminals were being used as a repository for malicious files as well as a tool to collect information and stage attacks. Pax failed to provide a good explanation on this to the payment processor.

Two major financial providers, one from the UK and another from the United States, have already started removing Pax technology from their payment infrastructure. “The packet sizes don’t match the payment data they should be sending, nor does it correlate with telemetry these devices might display if they were updating their software. PAX is now claiming that the investigation is racially and politically motivated,” the source said.

In early October, payment processing company FIS began removing Pax POS devices. FIS did not receive “satisfactory answers” as to why the devices were connecting to websites not listed in their documentation.

When Chinese foreign ministry spokesperson Wang Wenbin was asked about the Pax issue, he stated that he was not “aware” of the situation.

“I would like to stress that the Chinese government always asks Chinese companies overseas to follow commercial principles, international rules, and local laws when engaging in mutually beneficial cooperation. The U.S. should also provide a fair, just, and non-discriminatory business environment for Chinese and other foreign companies operating in the U.S.,” Wenbin stated.

Dale Carson, a former FBI special agent, noted that it is the function performed by Pax that makes the investigation very important. “Point-of-sale equipment, when you stripe a card or you tap it now, it’s a gateway to you and to the credit company. So any middleman, which is what it’s called, in between that, that is placed in there by someone with evil intent, can obtain information directly from that,” Carson told WOKV.

The FBI’s investigation hit Pax’s shares hard. On the Hong Kong stock exchange, the company fell by 43 percent on Oct. 27, forcing trading of the stock to be suspended until Nov. 1. Patty Walters, who served as senior vice president of security and services at Pax, resigned from the post following the raid. The company, founded in 2001, claims to have delivered more than 57 million terminals to customers in over 120 countries.