"NSO Group, the Israeli cybersecurity company blacklisted by the U.S. for its sale of hacking tools to authoritarian regimes, is under new ownership after lenders forced a change of control with plans to keep its controversial spyware business going, according to people familiar with the matter.
Creditors including Credit Suisse and Senator Investment Group moved earlier this year to foreclose on NSO's parent company, Luxembourg-domiciled NorthPole, according to people familiar with the matter. The takeover wiped out NSO's previous owners, including a private-equity fund started by Novalpina Capital that bought the company in a deal that valued it at roughly $1 billion in 2019, the people familiar said.
The lenders have been working with Omri Lavie, a co-founder of NSO, after foreclosing on the parent company, the people said. A Luxembourg-based holding company controlled by Lavie called Dufresne Holdings is listed as the sole shareholder of NSO's parent company, according to corporate filings.
NSO has been in financial distress since 2021, when the Biden administration blacklisted the company over allegations that its Pegasus surveillance software had been used inappropriately.
The company's lenders believe that NSO has valuable intellectual property and should continue operating rather than shut down and liquidate, even though its finances are in turmoil, people familiar with their thinking said. They have agreed not to call NSO in default for failing to pay debts to them since the 2021 blacklist and have extended millions of dollars to help pay NSO's expenses since then, the people said.
Lavie's company is involved with day-to-day management at NSO and has fired a number of directors and officers across the NSO corporate umbrella, according to the people familiar with the matter and corporate filings. "The company is managed directly by our CEO, Yaron Shohat. The lenders are currently in a process of restructuring the shareholders," an NSO spokesperson said.
NSO's new owners face the challenge of helping rehabilitate NSO's business and image after years of criticism from privacy advocates who allege that NSO and similar companies sell tools that allow governments and other customers to target and break into cellphones belonging to politicians, human-rights activists and journalists.
The company has previously said that its software products are used by intelligence and law-enforcement agencies and that it has taken steps to prevent abuse, including by terminating contracts with some governments.
The Biden administration, other Western countries and the United Nations have criticized NSO for its governmental clients' alleged abuses, while NSO has argued that it generally can't control how its customers use its software.
NSO is the most visible company to sell ready-to-use hacking tools that can be deployed against common consumer technologies. Its signature product, Pegasus, can extract data remotely from smartphones, offering countries without a homegrown cyber intelligence capability a way to collect digital information.
Founded in 2010 by three Israeli software engineers, NSO has been in private-equity hands for nearly a decade. In 2019, it was purchased by Novalpina Capital in a leveraged buyout funded with $500 million in debt.
NSO went into financial freefall after the Biden administration placed it on an export prohibition list in 2021 for allegedly selling spyware to foreign governments that use the tools to violate human rights and stifle dissent.
Last year, NSO was in talks to be acquired by several U.S. cybersecurity companies, but a deal never materialized.
The business has for years been considered a leading vendor in "zero-click" hacking tools, so called because of their ability to infiltrate targeted phones without needing a victim to click on a malicious link or attachment. Apple and other hardware makers have taken steps over the past year to attempt to protect against zero-click threats.
In an interview with The Wall Street Journal in January, Shohat, NSO's CEO, said clients had sometimes abused its tools, even as he defended the need to provide law-enforcement and intelligence agencies with the means to hack into smartphones. "I will not tell you that we never had mistakes, but we act responsibly," he said." [1]
1. EXCHANGE --- Business News: Blacklisted Cyber Firm Gets New Owner --- Israel's NSO Group has faced criticism that its tools are abused by foreign governments
Saeedy, Alexander; Volz, Dustin.
Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 27 May 2023: B.10.
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