After Barnes & Noble detected that one PIN pad was compromised in each of the 63 stores, it stopped using all PIN pads at nearly 700 stories across the country. The bricks-and-mortar chain also contacted federal law enforcement authorities and is working with authorities to investigate the breach.

"The tampering, which affected fewer than 1 percent of PIN pads in Barnes & Noble stores, was a sophisticated criminal effort to steal credit card information, debit card information, and debit card PIN numbers from customers who swiped their cards through PIN pads when they made purchases," the company said in a statement. "This situation involved only purchases in which a customer swiped a credit or debit card in a store using one of the compromised PIN pads."

Bugs Planted in PIN Pads

Barnes & Noble made clear that its customer database is secure . Purchases on Barnes & Noble.com, NOOK and NOOK mobile apps were not affected by the breach. The member database was also not affected, and none of the affected PIN pads was discovered at Barnes & Noble College Bookstores.

"The criminals planted bugs in the tampered PIN pad devices, allowing for the capture of credit card and PIN numbers," the company said after its internal investigation. "Barnes & Noble disconnected all PIN pads from its stores nationwide by close of business Sept. 14, and customers can securely shop with credit cards through the company's cash registers."

Tampered PIN pads were discovered in California, Connecticut, Florida, Illinois, Maine, New Jersey, New York, Pennsylvania and Rhode Island. Barnes & Noble said customers who swiped cards at stores in any of those states should change their PIN numbers, review accounts for unauthorized transactions and notify their banks immediately if they discover any unauthorized purchases or withdrawals.

Evidence of Inside Job

Gunter Ollmann, vice president of research at Damballa, said his initial investigation leads him to believe an insider was responsible. Specifically, he told us the breach appears to be a physical manipulation of the card readers in order to steal both debit card details and their accompanying personal identification numbers.

"This kind of fraud and their related tamper-resistance bypassing techniques would likely have been combated through the use of the chip and PIN technology commonly used in Europe and the Asia-Pacific," Ollman told us. "However, even these more advanced technologies have a number of flaws, but they make it considerably more difficult for criminals where it comes to cloning the victims cards and making fraudulent charges."

Based upon what Barnes & Noble has disclosed, Ollman believes the breach is an insider threat perpetrated by criminals who had physical access to the card readers. The evidence does not suggest that a batch of card readers were compromised at the manufacturer or distribution center.

"The criminals would have most likely had repeated access to the card readers -- and/or supporting computer systems -- in order to obtain the collected credentials," Ollman said. "It has been stated that only one reader per store was affected, which doesn't smell of a supply chain problem."