| Hi, it’s Ryan. A US-based private equity firm has taken the rare step of buying an Israeli spyware company. But first… Must Reads: The US private equity firm AE Industrial Partners has acquired one of Israel’s leading spyware companies in a move that’s injected enthusiasm into the Middle Eastern country’s scandal-plagued surveillance technology industry. Florida-based AE bought Tel-Aviv’s Paragon in a deal worth up to $900 million, according to a person familiar with the deal, who spoke on condition of anonymity to discuss confidential business. The agreement consists of an initial $500 million payment and could increase by a further $400 million depending on sales and other targets, the person added. AE plans to merge Paragon with REDLattice, a US cybersecurity firm that it owns, said the person. But Paragon will continue to operate out of Israel and has plans to expand its footprint, the person added. Virginia-based REDLattice says on its website that it explores cyber strategies to “give our nation the upper hand in security its digital frontier.” Paragon’s spyware is designed to help law enforcement and intelligence agencies hack into phones and covertly gather messages that are sent using encrypted messengers, such as Signal and Meta Platforms Inc.’s WhatsApp, according to a former Paragon employee, who spoke on condition of anonymity as they were not authorized to share information with the media. AE Industrial Partners and Paragon declined to comment. Representatives for REDLattice didn’t respond to inquiries. A US private equity firm investing in Israeli spyware is unusual, but it’s not unprecedented. Between 2014 and 2019, California’s Francisco Partners owned a majority stake in Israeli spyware purveyor NSO Group. But the relationship soured amid persistent accusations from human rights groups that NSO was selling its technology to dictators, who were abusing it not to fight crime, but to snoop on critics and journalists. Paragon has sought to distinguish itself from NSO. The latter’s notorious spyware, known as Pegasus, allows governments to gain unfettered access to a mobile phone, even granting the ability to secretly take control of its microphone and camera. Paragon’s flagship tool, known as Graphite, was designed to be more restrictive, and can only be used to gather communications from specific messaging apps, according to the former employee. Co-founded in 2019 by former Israeli prime minister Ehud Barak, Paragon claims in job advertisements that it applies “strict moral restrictions” and only works with authorities in 39 countries that it says have an “enlightened democracy.” According to procurement records and media reports, the company’s customers have included the US Immigration and Custom Enforcement agency and the Drug Enforcement Administration. The former Paragon employee credits the company’s sales strategy as having been key to the deal with AE – a model it’s likely other companies in Israel’s spyware sector will look to follow. | 
