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When PuTTY has sensitive data in memory and has no further need for it, it should wipe the data out of its memory, in case malware later gains access to the PuTTY process or the memory is swapped out to disk or written into a crash dump file. An obvious example of this is the password typed during SSH login; other examples include obsolete session keys, public-key passphrases, and the private halves of public keys.
After loading an RSA key, PuTTY runs the internal routine
rsa_verify() to check that it makes sense. Every version
of PuTTY since 2001, up to and including 0.62, has a bug in which
rsa_verify() fails to wipe from memory two large integer
variables containing p−1 and q−1, where
p and q are the two primes whose product is the RSA key
modulus. Recovering these from a PuTTY memory image would be
sufficient to reconstruct the private half of the RSA key; so those
versions of PuTTY would effectively store your private key in memory
for as long as they were running.
Similar problems apply to DSA keys: PuTTY fails to free the private key component x, and also does not free the random number k that it generates when making a DSA signature, possession of which is sufficient to expose the private key.
This applies to every program in the PuTTY suite which loads private keys: PuTTY, PSCP, PSFTP and Plink. If any of those programs loads a private key directly (rather than getting a signature from an SSH agent such as Pageant) then they will have left information equivalent to the private key in memory for their entire run.
Pageant also had the same bug, but of course since its job is to retain decrypted private keys in memory that isn't important in most cases. However, if you ever told Pageant to delete a key from memory, it would not have properly deleted it: it would still have retained a copy by mistake due to this bug.
PuTTY 0.63 fixes this bug in all the tools: those variables are now correctly wiped from memory.
However, it is still unavoidably very dangerous if malicious software is in a position to read the memory of your PuTTY processes: there is still a lot of sensitive data in there which cannot be wiped because it's still being used, e.g. session keys. And, as mentioned above, Pageant retains decrypted private keys in memory for long periods on purpose if you use it. So this fix somewhat mitigates the risks of malicious access to your PuTTY processes' memory, but no fix can eliminate those risks completely.
The RSA part of this vulnerability was spotted by Coverity Scan.
This bug has been assigned CVE ID CVE-2013-4208.