But before they could close the deal, an argument erupted over price and how quickly the spy tool could be delivered. A Mexican general overseeing the negotiations called for a pause until later that evening, according to two people present and a third with knowledge of the talks.

"We'll pick you up at your hotel and make sure to arrange a better atmosphere," they recalled the general saying.

That night, a convoy of cars arrived at the Israeli executives' hotel and took them to a new spot for the fateful negotiations: a strip club in the heart of Mexico City.

The general's security team ordered all the other clientele to leave the club, the three people said, and the talks resumed.

It was in that dark cabaret in March 2011, among women dancing onstage and shots of tequila, that the most powerful cyberweapon in existence got its start.

The spyware, known as Pegasus, has since become a global byword for the chilling reach of state surveillance, a tool used by governments from Europe to the Middle East to hack into thousands of cellphones.

No place has had more experience with the promise and the peril of the technology than Mexico, the country that inaugurated its spread around the globe.

A New York Times investigation based on interviews, documents and forensic tests of hacked phones shows the secret dealings that led Mexico to become Pegasus' first client, and reveals that the country grew into the most prolific user of the world's most infamous spyware.