In a nutshell, the problem is in the communication between the password management software on the computer and the unlock code on the device.
You'll be amazed to know that no matter what the password, the unlock code sent to the device is always the same!
Vulnerable devices include Kingston's DataTraveler BlackBox, the SanDisk Cruzer Enterprise FIPS Edition and the Verbatim Corporate Secure FIPS Edition.
SanDisk, in its security bulletin offered a vague description of the problem "SanDisk has recently identified a potential vulnerability in the access control mechanism and has provided a product update to address the issue." One can only wonder what the downloadable update does to change the unlock-code.
Similarly, Verbatim also only hinted at a problem and also offered a software-only solution.
Only Kingston has taken the issue seriously, issuing a worldwide recall for three of the nine products in their secured drive range. "It has recently been brought to our attention that a skilled person with the proper tools and physical access to the drives may be able to gain unauthorized access to data contained on the following Kingston Secure USB drives: DataTraveler BlackBox (DTBB), DataTraveler Secure - Privacy Edition (DTSP) and DataTraveler Elite - Privacy Edition (DTEP)."
Clearly any security regime that handles password verification other than on the secured device is going to be susceptible to these kinds of attacks, but to claim NIST's FIPS 140-2 certification and wave it around like some banner of impenetrability, giving an aura of perfection is clearly over the top in this instance.
We await a more serious response from SanDisk and Verbatim, more in line with Kingston's product recall. In the mean time, users might want to look at the IronKey range of devices.