Israeli Tax Authority investigates Zisapel startup over $42.5 million Radware deal
Probe focuses on suspected tax evasion linked to Radware's 2022 acquisition of DC Protection, while the company says the dispute concerns only the applicable tax rate.
The Israel Tax Authority is investigating suspected tax evasion offenses involving startup DC Protection, a company within the Zisapel family's Rad-Bynet technology group, Calcalist has learned.
The investigation focuses on alleged offenses involving the use of fraud, deceit and misrepresentation to evade income tax in connection with Radware's acquisition of DC Protection (formerly SecurityDAM) from its founder and sole shareholder, the late Yehuda Zisapel, in February 2022 for $42.5 million. Radware is listed on Nasdaq with a market capitalization of approximately $1.24 billion.
According to records filed with the Companies Registrar, following Yehuda Zisapel's death in March 2024, ownership of DC Protection was transferred equally to his three children: Roy Zisapel, who serves as CEO of Radware, and his sisters Carmi and Adi. Carmi Zisapel also serves as a director of DC Protection alongside Yossi Alib, who has been a director of the company since 2014.
The Tax Authority's investigation, led by the Tel Aviv Income Tax Investigations Office, was opened in January this year.
As part of the investigation, Tax Authority investigators searched the offices of Rad Data Communications at 24 Raoul Wallenberg Street in Tel Aviv, where DC Protection is also based. According to the Companies Registrar, DC Protection employs approximately 30 people. Investigators seized documents and computer equipment during the search.
Calcalist has also learned that at least one company employee, director Yossi Alib, was questioned after investigators searched his home in Ramat Gan and his vehicle, confiscating documents and his mobile phone.
The precise allegations under investigation have not been disclosed.
According to Radware's Nasdaq filings regarding the acquisition, DC Protection had collaborated closely with the company in the fields of cybersecurity and protection against distributed denial-of-service (DDoS) attacks.
DDoS attacks overwhelm an organization's servers with massive volumes of malicious traffic in an effort to disrupt services or bring systems offline. DC Protection supplied Radware with traffic diversion technology that redirects malicious traffic to dedicated scrubbing centers, reducing the burden on customers' networks during an attack.
Founded in 1997 by the late brothers Yehuda and Zohar Zisapel, Radware develops cybersecurity, application delivery and cloud security solutions. The company specializes in protecting organizations against DDoS attacks and, in recent years, has shifted its strategy from selling hardware appliances toward cloud-based cybersecurity services delivered under a Software-as-a-Service (SaaS) model.
Radware is one of the flagship companies associated with the Zisapel family's Rad-Bynet network. Unlike a conventional holding company, Rad-Bynet consists of a collection of independent technology companies founded by members of the family. While some companies share office space, management resources or infrastructure, they operate as separate legal and commercial entities.
Over the years, several companies within the Rad-Bynet ecosystem have collaborated on technology projects. Radware's acquisition of DC Protection was one such example.
Before the acquisition, DC Protection served as one of Radware's key technology suppliers, developing the infrastructure behind its scrubbing centers, which filter malicious traffic during cyberattacks while allowing legitimate traffic to continue uninterrupted. The long-standing technological partnership ultimately led Radware to acquire the company outright in February 2022.
DC Protection said in a statement: "To the best of the company's knowledge, neither DC Protection nor anyone acting on its behalf committed tax evasion. Rather, this is a professional dispute regarding the applicable tax rate. The matter has no connection whatsoever to Radware or to any other company within the Rad-Bynet group."
