A group of Israeli researchers explored the security of the Visual Studio Code marketplace and managed to "infect" over 100 organizations by trojanizing a copy of the popular 'Dracula Official theme to include risky code. Further research into the VSCode Marketplace found thousands of extensions with millions of installs.
I believe they’re referring to lower down in the article, where the researchers analyzed existing extensions on the marketplace:
If you look at the code of one of the “malicious code”, it hit a … local IP, not a remote one.
Does that mean the hacker is in my room??
We’re seeing connections from IP addresses that aren’t even routable on the internet. We’re compromised. Time to format.
Turns out you were the hacker all along