Intelligence coup of the century: Spying, profit also

inside the cia

Confidential documents published Tuesday by The Washington Post and German and Swiss broadcasters ZDF and SRF show: The CIA, the world-famous U.S. intelligence agency, secretly bought a Swiss company that sold encrypted devices and rigged them to spy on clients.

The company, Crypto AG, sold gadgets and software to spies, diplomats, military officials, and private companies for decades. The company acquired by the CIA at the height of the Cold War was secretly owned and operated by the CIA itself.

The main adversaries of the U.S. in the Cold War, the Soviet Union and China, were never Crypto customers but other clients included Iran, India and Pakistan, military juntas in Latin America, the Vatican, and other countries – more than 120 in total.

The spy agencies controlled nearly every aspect of the company’s operations from 1970 on. That allowed them to monitor Iran’s mullahs during the 1979 hostage crisis, fed Britain intelligence about Argentina’s military during the Falklands War, and caught Libyan officials congratulating themselves on the 1986 bombing of Berlin’s La Belle nightclub, which was frequented by the U.S. servicemen.

CIA agents secretly listened in on all communications that used the company’s devices, and the CIA’s leaked report called it “the intelligence coup of the century.”

At least four countries – Israel, Britain, Sweden and officially neutral Switzerland – knew of the operation, called “Operation Rubicon”, or were allowed access to some of the secrets it unearthed.

Crypto AG made millions of dollars for the two agencies, while providing them with access to the encrypted communications.

Crypto AG began selling encryption devices in 1940, marketing a mechanical device that was powered by a crank.

The CIA reportedly purchased the company with a handshake deal in 1951, which was renewed with a secretive “licensing agreement” in 1960.

In the decades that followed, the CIA oversaw technical advances in Crypto AG’s devices, shifting to electronic devices. The company reportedly contracted with Siemens and Motorola to modernize its gadgets.

The CIA’s surveillance continued through the 1990s and 2000s, even as Crypto AG’s revenue began to dwindle.

For decades, Crypto AG was the leading provider of encryption services, generating millions of dollars in profits.

The CIA maintained control over the company until at least 2008, when the agency’s confidential report obtained by The Post was drafted.

The U.S. spymasters and counterparts from what was then West Germany from 1970 were responsible for nearly all Crypto AG operations, from hiring and firing to sales tactics.

Through a classified partnership with BND, West Germany’s spy agency, the CIA designed Crypto AG’s encryption devices in a way that let the agency easily decrypt and read all messages sent by the company’s clients.

The reports cite a classified CIA history to underpin the allegations, some of which date back at least to 1992, when one of Crypto’s employees was arrested and held in Iran for nine months as a suspected spy.

Erich Schmidt-Eenboom, a German intelligence expert who helped analyze the documents, told the AP that the involvement of western spy agencies in Crypto had long been alleged. The Crypto representative arrested in Iran was released after the BND allegedly paid a $1 million dollar ransom.

The incident was one of the reasons why the German spy agency left the politically sensitive operation in 1993, he said.

At the time, the company dismissed reports that it was a secret asset of Western intelligence agencies as “an unbelievable conspiracy theory”, according to a report in German magazine Focus detailing a 1994 book on the subject.

While the BND used the proceeds generated from the sale of cryptography devices to fund field operations, the CIA used the money to buy up rival companies and establish a quasi-monopoly for Crypto, Schmidt-Eenboom said.

Schmidt-Eenboom cast doubt on the notion that the Swiss government was not aware of Crypto’s true nature.

“That’s not credible,” he said. “They shut both eyes.”

He added that Crypto remained part of the U.S. intelligence operation until 2018, when the company was sold.

Edward Snowden, a former U.S. intelligence employee, detailed similar U.S. operations involving manipulated communications equipment.

According to one document attributed to the CIA history of the operation, the U.S. foreign intelligence service and its West German counterparts overcame cultural differences and divergent interests “again and again, to fashion the most profitable intelligence venture of the Cold War.”

Some details of Crypto AG’s coordination with U.S. intelligence agencies had been previously reported. A 1995 investigation by The Baltimore Sun revealed that the National Security Agency reached an agreement with Crypto AG executives to secretly rig encryption devices.

However, the newly-published CIA report unveils the full extent of the U.S.’ operation of Crypto AG.

A reunifying Germany exited the venture in the early 1990s, after the Cold War ended, and the CIA bought it out for $17 million.

Crypto AG was liquidated in 2018 in a transaction the Washington Post said seemed designed to cover for a CIA exit and that created two successor companies: Crypto International and CyOne Security AG. Crypto AG was sold for between $50 million and $70 million.

Crypto products are still in use in more than a dozen countries.


CyOne Security and Crypto International have denied any current connection to the CIA, and Crypto International chairman Andreas Linde told The Post that he “feels betrayed” by the revelation.

“Crypto International and Crypto AG are two completely separate companies without any relationship,” a spokesperson for Crypto International said in a statement. “Crypto International is a Swedish owned company that in 2018 acquired the brand name and other assets from Crypto AG. We have no connections to the CIA or the BND and we never had.”

A representative for CyOne Security did not immediately respond to requests for comment.

“No guidance”

In a statement, CIA press secretary Timothy Barrett declined to confirm or deny the report, saying the agency is “aware of press reporting about an alleged U.S. government program and do not have any guidance.”

Germany’s BND refused to comment on the story.

Swiss investigation

Switzerland said on Tuesday it was probing reports that the CIA and the BND used a Swiss firm’s encryption technology to crack other nations’ top-secret messages.

Swiss Defense Ministry spokesperson, Carolina Bohren, told The Associated Press that “following research carried out by the media” her office had notified the Cabinet about the Crypto case on November 5, 2019. On January 15, the decision was made to appoint a former Supreme Court judge to look into the reports and report back by the end of June.

The Swiss government has appointed a former Swiss Supreme Court judge last month to scrutinize Crypto’s activities “to investigate and clarify the facts of the matter”, the Swiss Defense Ministry said.

“The events under discussion date back to 1945 and are difficult to reconstruct and interpret in the present day context,” it said in a statement.

Judge Niklaus Oberholzer is due to report back by the end of June, after which the Swiss cabinet will be briefed.

Swiss Economy Minister Guy Parmelin has suspended the general export licenses of Crypto International and CyOne Security until “the situation and open questions have been clarified.”

If Swiss authorities permitted its activities, Crypto may not have violated any Swiss laws seeking to limit “unwelcome” espionage activities by foreign agents on its soil.

Green Party member Balthasar Glaettli, told the nation’s state broadcaster that if the country knew of Crypto’s activities, “it would undermine the foundations of our political identity.”

German lawmaker

Konstantin von Notz, a lawmaker with Germany’s Greens party who sits on the parliamentary committee that oversees the BND, told ZDF that he has asked for answers to questions raised by the report about the operation.




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