For three pennies an hour, hackers can rent Inc. (Nasdaq: AMZN)’s servers to wage cyber attacks such as the one that crippled Sony Corp.’s PlayStation Network and led to the second-largest online data breach in U.S. history.

A hacker used Amazon’s Elastic Computer Cloud, or EC2, service to attack Sony’s online entertainment systems last month, a person with knowledge of the matter said May 13. The intruder, who used a bogus name to set up an account that’s now disabled, didn’t hack into Amazon’s servers, the person said.

The incident helps illustrate the dilemma facing Chief Executive Officer Jeff Bezos: Amazon’s cloud-computing service is as cheap and convenient for hackers as it is for customers ranging from Netflix Inc. (nasdaq: NFLX) to Eli Lilly & Co. (NYSE: LLY). Last month’s attack on Sony compromised more than 100 million customer accounts, the largest data breach in the U.S. since intruders stole credit and debit card numbers from Heartland Payment Systems in 2009.

(Sony begins restoring network – Read details here.)

“Anyone can go get an Amazon account and use it anonymously,” said Pete Malcolm, chief executive officer of Abiquo Inc., a Redwood City, California-based company that helps customers manage data internally and through cloud computing. “If they have computers in their back bedroom they are much easier to trace than if they are on Amazon’s Web Services.”

Network Resumption

Sony on May 14 partially restarted its PlayStation Network and Qriocity services, which had been shut since April 20 because of the intrusion. The company has hired three security firms to investigate and is working with the law enforcement officials. Sony has faced a backlash from regulators and customers over the time it took to warn customers that their data may have been stolen.

Drew Herdener, a spokesman for Seattle-based Amazon, the world’s largest online retailer, declined to comment. Amazon didn’t respond to a request to speak with Bezos. Patrick Seybold, a U.S. spokesman for Tokyo-based Sony, declined to comment beyond public statements made on the matter.

The Federal Bureau of Investigation will likely subpoena Amazon or seek a search warrant to access the history of transactions, trace who had access to the specific Internet address at the time and get details on payment data, said E.J. Hilbert, president of the security company Online Intelligence and a former FBI cyber-crime investigator.

FBI Probe

FBI Special Agent Darrell Foxworth, a spokesman for the agency’s San Diego office, said he couldn’t comment on whether the bureau served Amazon with a search warrant or subpoena and that investigators are following up “each and every lead.” Amazon’s Herdener declined to say whether his employer had been subpoenaed or served with a search warrant.

Amazon Web Services leases computing space to companies so they don’t have to buy their own servers to store data and handle a surge in visitors.

Prices for EC2 range from 3 cents to $2.48 an hour for users in the east coast of the U.S., according to its website. Signing up to the service requires a name, e-mail address, password, phone number, billing address and credit card information. Users get an automated call from Amazon and are asked to dial in a four-digit verification code to complete the registration process.

That’s not enough to scare off hackers seeking to conduct attacks anonymously, and Amazon doesn’t have the means to detect illegal uses of its servers, Abiquo’s Malcolm said.

Good Vs. Bad Guys

“Realistically, Amazon can’t do anything to prevent it,” Malcolm said. “There is no way of telling who’s a good guy and who’s a bad guy.”

Web Services generated about $500 million in revenue for Amazon in the past year, according to estimates at Barclays Capital. That’s about 1.5 percent of 2010 sales at Amazon, which doesn’t disclose sales from the unit.

Amazon fell $3.51, or 1.7 percent, to $202.56 on May 13 in Nasdaq Stock Market trading, stemming this year’s gain to 13 percent. Sony, which has fallen 23 percent this year, closed unchanged at 2,241 yen today in Tokyo.

As companies from Amazon to Microsoft Corp. (MSFT) build server farms worldwide, the services can help hackers hide their tracks, said Hilbert.

Cloud services are also attractive for hackers because the use of multiple servers can facilitate tasks such as cracking passwords, said Ray Valdes, an analyst at Gartner Inc. Amazon could improve measures to weed out bogus accounts, he said.

Hijacked Servers

The use of hijacked or rented servers to launch attacks is typical for sophisticated hackers, according to Hilbert. Chinese hackers used the servers of a major U.S. Internet service provider in 2008 to break into a government agency and several defense contractors, according to a secret Nov. 3, 2008, cable exposed by Wikileaks.

The hackers “used at least three separate systems at the unnamed ISP in multiple network intrusions and have exfiltrated data via these systems,” according to the cable.

In some cases, hackers hide their tracks beneath several layers of proxy servers that can span the globe. A recent attack against computers in South Korea was controlled from servers in more than 20 different countries, according to Georg Wicherski, a security analyst at Santa Clara, California-based McAfee Inc. (MFE) The identity of the offenders is unknown, he said.

Rethinking Cloud

Malicious attacks in the U.S. are on the rise. They made up 31 percent of data breaches in 2010, up from 24 percent a year earlier, with each event costing U.S. businesses an average of $7.2 million, according to a March report by the Ponemon Institute. The study found that about 85 percent of all U.S. companies have experienced one or more attacks.

Last month’s incursion was “very carefully planned, very professional, highly sophisticated criminal cyber attack,” Sony has said.

The episode will cause individuals and companies to rethink what data to put on the cloud and force companies to potentially double what they spend on application security, said Murray Jennex, an associate professor at San Diego State University who specializes in computer systems security. In the long run, it will be cheaper than being hacked, he said.

“This puts cloud computing into proper perspective,” Jennex said. “Everybody’s been thinking it’s chic and ignoring the security aspect. I think this reminds companies that things that make them great need to stay under their control.”

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