NSO may sell off its Pegasus spyware — and open the door to US police contracts

“We’re in uncharted territory.”

NSO Group sign

NSO is reportedly in talks to sell off its software to U.S. defense contractor L3Harris.

Photo: Amir Levy/Getty Images

The Israeli spyware firm NSO Group has already demoed its Pegasus technology with the NYPD, pitched its phone-hacking technology to the San Diego PD and licensed Pegasus for evaluation by the FBI.

Those attempts by NSO to enter the U.S. law enforcement market appear to have mostly led to dead ends for the company. But now, as NSO is reportedly in talks to sell off its software to U.S. defense contractor L3Harris — the company behind StingRay cell phone trackers — experts fear it could swing open the door to U.S. law enforcement’s use of NSO’s hacking technology.

“Who is L3Harris going to sell to? The answer is: They’re going to sell to the same people who bought their StingRays, which is police,” said John Scott-Railton, a senior researcher at the University of Toronto’s Citizen Lab, who has extensively studied the use of Pegasus around the world.

“This seems to be a back-door way of getting U.S. and other big democracies’ business by hiding the technology within a company that already has law enforcement clients,” said Jennifer Granick, surveillance and cybersecurity counsel with the ACLU Speech, Privacy and Technology Project. “It’s a melding of two really problematic companies, should the deal go forward.”

Neither NSO Group nor L3Harris responded to Protocol’s request for comment, but a spokesperson for L3Harris told The Guardian: “We are aware of the capability and we are constantly evaluating our customers’ national security needs. At this point, anything beyond that is speculation.” News of the possible acquisition was first reported by Intelligence Online.

Less than a year ago, the U.S. put NSO Group on the Commerce Department’s Entity List, which prohibits U.S. companies from exporting to blacklisted foreign companies without a license. At the time, Commerce Secretary Gina Raimondo said the department was moving to “hold companies accountable” for “malicious activities that threaten the cybersecurity of members of civil society, dissidents, government officials, and organizations here and abroad.” Pegasus technology has been used to hack human rights defenders, journalists, State Department officials and many more.

The blacklisting by the U.S. has contributed to financial struggles for the company, which is now reportedly in talks to sell off the underlying code to its hacking technology. But the NSO’s status on the entity list does little to prevent such a deal from going through, said Doug Jacobson, an export controls attorney at the Washington, D.C. firm Jacobson Burton Kelley. Unlike OFAC sanctions, which prohibit all transactions with any sanctioned person or company, “the Entity List is very limited in scope” and applies only to exports, not imports or acquisitions, Jacobson said.

Still, such an acquisition by L3Harris would be unprecedented in nature. “We’re in uncharted territory,” Jacobson said. “I can’t even think of a case where a U.S. company bought a company on the entity list. Those types of companies typically are either highly problematic or not in the mainstream.”

It’s not hard to see why a potential deal between L3Harris and NSO could be mutually beneficial for both companies — if not for Americans’ privacy. L3Harris’ StingRay technology, which enables cell phone location tracking, is already widespread throughout the U.S. The Pegasus spyware would provide L3Harris with yet another surveillance tool to market to existing clients.

There’s plenty of evidence that law enforcement agencies would be interested. The New York Times found that the FBI bought Pegasus in 2018 and tested it for two years before ultimately deciding not to deploy the technology. In a letter describing the agency’s interest in the tool, an FBI official wrote that Pegasus could be used “for the collection of data from mobile devices for the prevention and investigation of crimes and terrorism, in compliance with privacy and national security laws.”

“As a foreign entity steeped in reputational risk and scandal, NSO tried and seemingly failed to sell to U.S. police departments,” Scott-Railton said. “But with a U.S. owner, that changes.”

The upshot for NSO is also clear: While it doesn’t guarantee the company would be removed from the entity list, it could help, since that designation was based on malicious uses of NSO’s software. “The only off-ramp is selling that software,” Jacobson said. “Then, the rest of NSO could theoretically be removed.”

In a statement to Protocol, a senior White House official said: “The US Government opposes efforts by foreign companies to circumvent US export control measures or sanctions, including placement on the U.S. Department of Commerce’s Entity List for malicious cyber activity.”

The official said the National Security Council is “working to implement a ban on U.S. government purchase or use of foreign commercial spyware that poses counterintelligence and security risks for the U.S. government or has been improperly used abroad.”

An executive order by President Biden could be the only option if the U.S. wants to stand in the way of a deal, Jacobson said. Congress isn’t likely to take up the issue in any timely manner. The Committee on Foreign Investment in the United States only oversees foreign investments in U.S. companies, not the other way around. And the Department of Commerce’s Bureau of Industry and Security governs U.S. exports, not acquisitions. “There are very few arrows in the quiver,” Jacobson said.

Allowing the deal to go forward would be an “own goal” by the Biden administration, Scott-Railton said. “If the administration pulls back or allows them to basically slip out from under this,” he said, “it will send the message: You can hack the U.S. government if you have the right backers.”


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