FBI Investigation Causes Alarom Stock to Plunge 96% to 50 Million Shekels

Alarom, an Israeli data collection company, saw its stock collapse by over 70% last weekend, dropping its market value from a peak of 1.1 billion shekels to approximately 50 million shekels, a 96% decline from its all-time high. The plunge followed reports that the FBI is investigating whether Alarom's subsidiary, NetNut, was involved in connecting internet-enabled devices without owners' consent to a proxy network used to mask user locations. This investigation led to the suspension of some of Alarom's network services.

Alarom stated it is taking the matter seriously and will fully cooperate with law enforcement to ensure any misuse of its infrastructure is thoroughly investigated and those responsible are prosecuted. The company also reported disruptions in some services due to the investigation, warning that prolonged interruptions could significantly impact its operations, financial results, and customer service. Despite the ongoing probe, Alarom noted it has not yet received any formal inquiry from the FBI or other regulatory bodies.

The FBI's investigation centers on NetNut's flagship product, which provides residential proxy networks allowing clients to access websites as if browsing from different geographic locations. While these services have legitimate uses, such as regional product testing, they can also be exploited by cybercriminals to conceal malicious traffic. Bloomberg reported that the FBI has been tracking potential links between NetNut and malicious software called Popa, which allegedly hijacks user devices.

Google has also been involved, suspending accounts and services allegedly used by the malicious software linked to NetNut and sharing technical intelligence with law enforcement to support broader enforcement efforts. Google claimed its actions significantly disrupted NetNut's proxy network and reduced the pool of devices available to the proxy operator by millions.

Founded in 2013 as Safe-T, Alarom initially focused on cybersecurity solutions before shifting to data services after acquiring NetNut in 2019. This strategic pivot led to a rapid stock price increase, peaking in mid-2024. However, recent financial reports showed slowing growth and declining profits, attributed mainly to increased R&D expenses related to AI adaptation. In 2025, Alarom reported revenues of $40.7 million, up 28% from 2024, but net income fell 83% to $1 million.

Alarom's management has emphasized ongoing efforts to investigate the incident and assess infrastructure impacts, temporarily suspending relevant data traffic to evaluate potential malicious activity and implement necessary safeguards before resuming normal operations.