Market reaction
Shares of Alarum Technologies Ltd (NASDAQ:ALAR) plunged 23.6% in after-hours trading on Thursday after reports surfaced that the Federal Bureau of Investigation is probing whether a subsidiary played a role in linking customers' home internet devices without consent. The decline came as investors digested law enforcement activity and media coverage tied to the inquiry.
Reporting and law enforcement action
Bloomberg reported that the FBI is examining potential connections between NetNut, an Israel-based subsidiary of Alarum that sells access to residential proxy networks, and software known as Popa, which is alleged to be used to co-opt people s devices. According to that report, the investigation has been underway for more than a year.
On Thursday the Department of Justice said the FBI had seized multiple internet domains as part of a coordinated law enforcement action. The DOJ described the operation as targeting infrastructure associated with NetNut's residential proxy platforms, along with administrators and users of those platforms.
What residential proxy networks do
Residential proxy networks can route internet traffic so that it appears to originate from a different location. Businesses commonly employ these services to tailor website content or functionality for different regions.
Company response
Omer Weiss, corporate legal counsel for Alarum, told Bloomberg that the company was informed on Thursday that the FBI had seized some of its domains. In a statement, Weiss said, "Alarum takes this matter seriously and will fully cooperate with law enforcement to ensure any misuse of its infrastructure is thoroughly investigated and those responsible are held to account."
The FBI declined to comment on the investigation.
Summary and next steps
The unfolding situation centers on law enforcement scrutiny of infrastructure connected to NetNut and reports of a lengthy probe into potential misuse of residential proxy platforms. Alarum has acknowledged the domain seizures and pledged cooperation; the investigation and its details remain subject to law enforcement disclosures.
Key points
- Alarum Technologies stock fell 23.6% in after-hours trading following reports of an FBI probe into a subsidiary.
- The Department of Justice said the FBI seized multiple internet domains tied to infrastructure associated with NetNut's residential proxy platforms, plus administrators and users.
- Residential proxy networks route traffic to appear from other locations and are used by businesses to customize website experiences for different regions.
Risks and uncertainties
- The investigation has reportedly been ongoing for more than a year; the duration and scope of law enforcement activity create uncertainty for stakeholders.
- Seizure of domains and other coordinated actions could disrupt NetNut's platforms and related services, with potential operational impacts.
- Limited public comment from the FBI constrains visibility into specific allegations and next steps.