Total value of deal could reach $900 million

US private equity firm said to bid for Israeli spyware maker Paragon

Paragon’s Graphite phone-hacking software targets data backed up to the cloud; is deployed by government bodies in the US and Israel; firm is backed by former premier Ehud Barak

Sharon Wrobel is a tech reporter for The Times of Israel.

A person types on a laptop keyboard, June 19, 2017. (AP Photo/Elise Amendola/File)
A person types on a laptop keyboard, June 19, 2017. (AP Photo/Elise Amendola/File)

Israeli cyber intelligence startup Paragon Solutions, backed by former prime minister Ehud Barak, is being sold to US private equity firm AE Industrial Partners, in a deal worth at least $500 million.

Financial details of the deal have not yet been disclosed, but according to reports in the Hebrew press, the total value could reach $900 million subject to achieving certain milestones in the future. Following the sale, Paragon is said to continue to operate in Israel. AE Industrial Partners and Paragon did not immediately respond to The Times of Israel’s requests for comment.

Paragon is a rival of Israeli cyber-hacking firm NSO group, the maker of the controversial Pegasus software.

The Tel Aviv startup was founded in 2019 by former IDF elite intelligence unit 8200 commander Ehud Schneorson, CEO Idan Nurick, CTO Igor Bogudlov, and Chief Research Officer Liad Abraham and has former prime minister Barak sitting on its board. Among its main investors are US-based venture capital firm Battery Ventures and Israeli venture capital fund Red Dot.

Paragon describes itself as a startup that provides its clients with “ethically based tools to disrupt intractable threats, cyber and forensic capabilities to locate and analyze digital data, cyber workforce training, and critical infrastructure analysis, and threat mitigation.”

The offensive cyber startup is the developer of software known as Graphite, a regulated spyware tool that allows users, including government bodies to access, collect, and extract data backed up from an individual’s smartphone phone to the cloud. The software is also capable of extracting data from encrypted-messaging applications such as WhatsApp, Telegram, and Signal.

Illustrative: NSO Group logo seen on a smartphone in front of a laptop showing hacking code. (Shutterstock)

Among its clients is the US government and law enforcement agencies in Europe and Israel. In September, Paragon was awarded a $2 million contract by the US Homeland Security’s Immigration and Customs Enforcement agency for a “fully configured proprietary solution, including license, hardware, warranty, maintenance, and training.”

This is not the startup’s first contract with the US administration. The US Drug Enforcement Administration has been deploying Paragon’s phone spyware as part of its investigative work,  according to a report in the The New York Times.

The contracts that Paragon scored in recent years come at a time of US government actions to scrutinize the improper use of commercial spyware. The US government blacklisted Israel’s NSO Group in November 2021, adding it to the list of foreign companies that engage in malicious cyber activities.

NSO has been accused of providing spyware software to foreign governments to maliciously target government officials, journalists, businesspeople, activists, academics, and embassy workers. NSO developed Pegasus, a tool that can switch on a phone’s camera or microphone and harvest its data. There have been repeated allegations that the software is being used to abuse human rights.

NSO has been accused of selling the spyware to the governments of Azerbaijan, Bahrain, Kazakhstan, Mexico, Morocco, Rwanda, Saudi Arabia, Hungary, India, and the United Arab Emirates, which used it to hack into the phones of dissidents, journalists, and human rights activists.

Times of Israel staff contributed to this report.

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