American private investment firm AE Industrial Partners has acquired Israeli cyber attack company Paragon Solutions, sources close to the matter told Globes. Paragon was founded by former commander of the IDF’s 8200 Intelligence Unit, Brig. General (res.) Ehud Schnewerson and former Prime Minister Ehud Barak. AE will pay an estimated $900 million, half in cash and half in future payments.
The immediate $450 million payment will be split between Paragon’s 400 employees (20%) and the company’s five founders (30%). Schneursson, who serves as Chairman and CEO of Aidan Nurik, Igor Bogodlov, Liad Abraham, and Liran El Kayam. The other half of the amount will go to investors, US venture capital fund Battery Ventures and Israeli venture capital fund Red Dot, which last week saw the acquisition of another portfolio company – cybersecurity company Perception Point – for an estimated $100-200 million.
It is estimated that Ehud Barak owns several percent of Paragon, worth between $10 and $15 million before taxes. His involvement in the company as a businessman raised concerns among buyers that the Israeli leadership would not approve the deal for political reasons due to its hostility to Barak. Paragon operates under the close supervision of the Israeli Ministry of Defense, which in the past opposed the sale of cyber attack company NSO Group to the US defense company L3 on security grounds. As far as is known, the Paragon deal was not even considered by the political level and was approved by senior officials in the Ministry of Defense several weeks ago.
Globes will integrate the Israeli company into its portfolio of Internet company REDLattice – a defense integrator, which creates custom projects for the US Department of Defense and English-speaking countries, AE has learned. The deal will allow Paragon to expand its market footprint in countries such as the United Kingdom, Ireland, Australia, New Zealand and Canada in addition to the United States. Sources told Globes that Paragon will continue to operate in Israel as an Israeli company, but the deal includes a clause allowing it to export cyber attack technology to the United States.
Eran Gurev, a partner at Francisco Partners and former CEO of NSO, invested in Paragon when the company was founded. But Gurev will not benefit from the exit, if the deal is completed, because he sold his shares years ago.
According to IVC Research, $30 million was invested in Paragon Solutions in early 2020.
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Paragon has developed software capable of extracting data from encrypted applications
Paragon has developed a Trojan called Graphite that can extract data from encrypted messaging apps like WhatsApp, Facebook Messenger, Signal, and Telegram. Unlike other Israeli cyber attack companies such as NSO and Candiru, Paragon Solutions was founded with US investments initially in order to operate only in 34 countries defined as democratic in coordination with local security authorities and legal systems with minimal invasion of privacy.
In contrast to NSO’s Pegasus, Paragon does not take photos of the user with their phone’s camera and, to its knowledge, does not use the phone’s microphone, but only records audio conversations in chat apps. The company began selling its products in the United States about two years ago, and its clients include the US Drug Enforcement Administration (DEA) and the security authorities in Singapore, where, according to a report on the Intelligence Online website, it replaced the technologies of Israeli companies. Blacklisted in the United States.
Published by Globes, Israel Business News – en.globes.co.il – on December 16, 2024
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