European Investment Fund financed Israeli spyware company Paragon

The European Investment Fund backed Israeli spyware firm Paragon Solutions in 2020 through a local venture fund, according to a report by Belgian platform for investigative journalism, Apache. Founded a year earlier by former Israeli prime minister Ehud Barak and an Israeli ex-intelligence chief, Paragon’s spyware has been used against activists in multiple countries, including Italy.

The European Investment Fund (EIF) provided venture capital for Israeli spyware firm Paragon Solutions, confirmed a spokesperson for the European Investment Bank Group, to which the EIF belongs.

“In January 2020, the EIF signed a commitment of €21.2m with Aurora Europe SCSp, a fund-of-funds with a total size of €85m and a focus on life sciences and technology”, said the spokesperson. “This fund went on to invest in 31 funds, which collectively went on to invest in over 900 companies.”

“One of these funds, Red Dot Capital Partners II LP, which specialises in cybersecurity, AI, and machine learning, invested in 10 companies, including in Paragon Solutions in October 2020. Red Dot divested from Paragon Solutions in December 2024.”

In December 2024, Paragon was acquired for $900m [€772m] by the American investment company AE Industrial Partners. Paragon Solutions has since become part of the American subsidiary RedLattice.

It is unclear how much Red Dot initially invested in Paragon Solutions, and how much it earned from the sale to AE Industrial Partners. The EIB spokesperson was unable to provide information on this matter. Apache asked Red Dot for clarification but has not received a response.

Horizon 2020

An EIF document designates Paragon Solutions as a final recipient that received support under the InnovFin Equity Facility for Early Stage (IFE).

This financing instrument was launched as part of Horizon 2020, the EU's Framework Programme for Research and Innovation from 2014 to 2020. Israel participated in this program as an “associated country”, as well as in its successor, Horizon Europe.

According to an EIB spokesperson, the EIF “has necessary safeguards and rules to ensure that EU funds do not support companies or projects that violate EU standards".

"The EIF requires its intermediaries to apply relevant eligibility criteria and other applicable obligations to the final beneficiaries. According to the information available to us, the investment met the applicable eligibility criteria at the time,” the spokesperson also said.

But knowing where EU taxpayers' money is going is key for many.

“This is yet another example of how EU taxpayers are financing an industry that is spying on them with the support of EU institutions”, says Belgian Green MEP Saskia Bricmont, who sat on the PEGA committee that investigated the Pegasus case.

“It is deeply troubling that the Union is directly or indirectly enabling tools that erode democracy, fundamental rights and the rule of law.”

“This raises serious questions about the governance, transparency and accountability of the Union’s funding mechanisms. I strongly call upon the European Commission and member states to implement the recommendations of the European Parliament to strictly regulate the use of spyware and prohibit funding toward this industry," she said.

For Frank Vanaerschot, director of Counter Balance, an NGO that monitors the EIB, among others, the selection criteria used by the EIB Group are" too broadly defined" and monitoring is "inadequate”.

“The EIB Group assumes that intermediaries comply with the rules, but does not check this itself. The use of different funds, with one private fund investing in another, also makes monitoring more difficult,” he said.

Vanaerschot emphasises that, in the context of the Israeli war in Gaza, Counter Balance is calling on the EIB Group to conduct a serious review of all investments in Israeli companies.

Italian scandal

Paragon Solutions was co-founded in 2019 by former Israeli prime minister Ehud Barak and Ehud Schneorson, commander of Unit 8200, an Israeli military intelligence unit, between 2013 and 2017.

Paragon Solutions specialises in developing advanced spyware. Graphite, Paragon's software programme, enables users to break into encrypted smartphones.

The company sells its spyware to intelligence and security services worldwide. The US Immigration and Customs Enforcement (ICE) recently gained access to Paragon's software.

At the end of January, WhatsApp announced that the accounts of approximately 90 users, including journalists and civil society activists, had been targeted with spyware from Paragon Solutions.

In a report published on 5 June by the Italian parliamentary committee overseeing intelligence services, the Italian government acknowledged the use of Paragon's spyware against two activists.

According to the report, it was unclear who had targeted Italian journalist Francesco Cancellato with Paragon's software.

According to Israeli media Haaretz, Italy rejected Paragon's offer to further investigate the Cancellato case.

Still, the head of the Italian intelligence service DIS said the audit would pose a risk to national security.

According to The Guardian, Paragon terminated its contract with Italy after WhatsApp disclosed the hacking, while Italian media later reported that the contract was terminated “by mutual agreement.”

In June, Citizen Lab, an interdisciplinary laboratory based at the University of Toronto, found forensic evidence confirming "with high confidence" that both a prominent European journalist (who requests anonymity) and Italian journalist Ciro Pellegrino were targeted with Paragon’s Graphite mercenary spyware.

This article was first published by Apache. A longer version in Dutch can be found here. EUobserver is part of Apache's network, enabling editorial collaboration.