FBI Investigates Israeli Tech Firm Alarom Amid Proxy Network Allegations and Stock Collapse

Israeli technology company Alarom is under investigation by the FBI, which has caused its stock to plummet on both the Nasdaq and Tel Aviv stock exchanges and led the company to suspend parts of its operations. The FBI is examining whether NetNut, a subsidiary of Alarom, was involved in connecting customers' home internet devices to a network that others can use to mask their locations without the owners' consent. This probe has been ongoing for over a year and focuses on residential proxy networks, which route internet traffic through private home connections worldwide, allowing users to appear as if they are browsing from different locations.

Alarom's shares dropped 71.3% on the Tel Aviv Stock Exchange to a market value of 50.7 million shekels, with similar declines on Nasdaq. The company, led by CEO Shahar Daniel, provides internet access and data collection solutions to organizations and operates without a controlling shareholder. The FBI's investigation centers on allegations that NetNut's proxy services may have been linked to software called Popa, which allegedly enables unauthorized control of user devices.

Last week, Alarom reported that the FBI had seized certain domains related to NetNut. Following this, the company experienced disruptions in some services and warned that prolonged interruptions could significantly impact its financial results and service delivery. On the morning of the report, Alarom announced a temporary suspension of data traffic through the affected proxy services to investigate the incident, assess infrastructure impact, and implement necessary security measures before resuming normal operations.

Experts warn that residential proxy networks can be exploited for illegal activities such as fraud and cyberattacks, often without device owners' knowledge. Security firms have identified overlaps between NetNut and the Popa software, which has been found on Android devices globally, especially smart TV boxes. Alarom and NetNut have denied some of the security firms' claims, emphasizing their commitment to lawful and responsible service use, including customer due diligence and abuse monitoring.

The FBI's investigation is part of a broader U.S. law enforcement effort to scrutinize residential proxy networks, which have been used to hijack millions of devices worldwide. Alarom's corporate legal advisor, Omer Weiss, stated the company is taking the matter seriously and will fully cooperate with authorities to ensure any misuse of its infrastructure is thoroughly investigated and responsible parties held accountable.