Sources detail how a 2019 NSO deal to sell Pegasus services to Uganda, followed by an attempt to hack US diplomats in Uganda using Pegasus, led to NSO's decline
For years, the Israeli spyware maker thrived through scandal. Then, US diplomats in Uganda got hacked by Pegasus
Context & Ripple Effects
NSO had survived scandal before: Blackstone walked away from a stake in 2017 talks over the firm after Pegasus was found in use against activists, yet the company kept growing. Its model rested on two pillars visible in earlier coverage — hundreds of millions in Gulf-state sales and Pegasus's status as a licensed weapon woven into Israel's diplomatic outreach.
The Uganda story marks where that shield broke: a 2019 sale to Kampala followed by an attempt to hack US diplomats stationed there converted 'scandal tolerated by patrons' into a direct affront to Washington, the customer ecosystem NSO could least afford to alienate.
First-order effects
- NSO loses the political cover that made its business work — once Pegasus is aimed at US government personnel, the Israeli export-licensing arrangement that framed the tool as a controlled weapon becomes a liability rather than protection.
- Western government customers and partners pull back: the later New York Times investigation showing the FBI bought but never deployed Pegasus captures how quickly US agencies distanced themselves after the diplomat-targeting episode.
Second-order effects
- Washington's exposure forces Jerusalem to tighten oversight of spyware exports, threatening the state-brokered sales channel through which NSO reached Gulf and African buyers.
- Rival surveillance vendors and existing clients face the same scrutiny cascade — deals like the Gulf contracts get re-examined under a new assumption that any client may turn the tool against Western officials.
Third-order effects
- If the pattern holds, commercial spyware stops being a diplomatically laundered export and gets treated like any other arms transfer, with the vendor absorbing the reputational blast radius its clients create — the path that ends in the severe financial troubles investigators later documented at NSO.
The trend: Commercial spyware firms built on state-brokered sales are discovering that one client attacking Western officials can collapse the entire diplomatic framework that sustained their market.