Phala Confidential AI Compromised

Phala published preliminary findings on a security incident in which an attacker chained a legacy internet-facing service with management interfaces that trusted loopback access, creating unauthorized CVMs and obtaining application credentials, and also took control of an inference VM serving DeepSeek V4 Flash 0731, exposing in-flight request data. Requests routed to Phala by OpenRouter between October 21, 2026 00:00 UTC and November 8, 2026 05:35 UTC should be treated as exposed, and affected CVM owners were contacted directly with rotation guidance. Phala contained the incident on November 8, rotated its KMS root key on November 6, restored the model service with added protections, and says a full root cause analysis is still in progress.