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Crypto AG was a Swiss company specialising in communications and information security founded by
Boris Hagelin Boris Caesar Wilhelm Hagelin (2 July 1892 – 7 September 1983) was a Swedish businessman and inventor of encryption machines. Biography Born of Swedish parents in Adshikent, Russian Empire, Hagelin attended Lundsberg boarding school and late ...
in 1952. The company was secretly purchased for US $5.75 million and jointly owned by the American
Central Intelligence Agency The Central Intelligence Agency (CIA ), known informally as the Agency and historically as the Company, is a civilian foreign intelligence service of the federal government of the United States, officially tasked with gathering, processing, ...
(CIA) and West German
Federal Intelligence Service The Federal Intelligence Service (German: ; , BND) is the foreign intelligence agency of Germany, directly subordinate to the Chancellor's Office. The BND headquarters is located in central Berlin and is the world's largest intelligence he ...
(BND) from 1970 until about 1993, with the CIA continuing as sole owner until about 2018. The mission of breaking encrypted communication using a secretly owned company was known as " Operation Rubikon". With headquarters in Steinhausen, the company was a long-established manufacturer of
encryption In cryptography, encryption is the process of encoding information. This process converts the original representation of the information, known as plaintext, into an alternative form known as ciphertext. Ideally, only authorized parties can dec ...
machines and a wide variety of cipher devices. The company had about 230 employees, had offices in
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Abu Dhabi Abu Dhabi (, ; ar, أَبُو ظَبْيٍ ' ) is the Capital city, capital and List of cities in the United Arab Emirates, second-most populous city (after Dubai) of the United Arab Emirates. It is also the capital of the Emirate of Abu Dha ...
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Buenos Aires Buenos Aires ( or ; ), officially the Autonomous City of Buenos Aires ( es, link=no, Ciudad Autónoma de Buenos Aires), is the capital and primate city of Argentina. The city is located on the western shore of the Río de la Plata, on South Am ...
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Kuala Lumpur , anthem = '' Maju dan Sejahtera'' , image_map = , map_caption = , pushpin_map = Malaysia#Southeast Asia#Asia , pushpin_map_caption = , coordinates = , su ...
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and Steinhausen, and did business throughout the world. The owners of Crypto AG were unknown, supposedly even to the managers of the firm, and they held their ownership through
bearer shares A bearer instrument is a document that entitles the holder of the document to rights of ownership or title to the underlying property, such as shares or bonds. Unlike normal registered instruments, no record is kept of who owns bearer instrument ...
. The company has been criticised for selling backdoored products to benefit the American, British and German national signals intelligence agencies, the
National Security Agency The National Security Agency (NSA) is a national-level intelligence agency of the United States Department of Defense, under the authority of the Director of National Intelligence (DNI). The NSA is responsible for global monitoring, collectio ...
(NSA), the
Government Communications Headquarters Government Communications Headquarters, commonly known as GCHQ, is an intelligence and security organisation responsible for providing signals intelligence (SIGINT) and information assurance (IA) to the government and armed forces of the Unit ...
(GCHQ), and the BND, respectively. On 11 February 2020, ''
The Washington Post ''The Washington Post'' (also known as the ''Post'' and, informally, ''WaPo'') is an American daily newspaper published in Washington, D.C. It is the most widely circulated newspaper within the Washington metropolitan area and has a large nat ...
'',
ZDF ZDF (, short for Zweites Deutsches Fernsehen; ; "Second German Television") is a German public-service television broadcaster based in Mainz, Rhineland-Palatinate. It is run as an independent nonprofit institution, which was founded by all fe ...
and SRF revealed that Crypto AG was secretly owned by the CIA in a highly classified partnership with West German intelligence, and the spy agencies could easily break the codes used to send encrypted messages. The operation was known first by the code name "Thesaurus" and later "Rubicon". According to a Swiss parliamentary investigation, " Swiss intelligence service were aware of and benefited from the Zug-based firm Crypto AG’s involvement in the US-led spying".


History

Crypto AG was established in Switzerland by the Russian-born Swede,
Boris Hagelin Boris Caesar Wilhelm Hagelin (2 July 1892 – 7 September 1983) was a Swedish businessman and inventor of encryption machines. Biography Born of Swedish parents in Adshikent, Russian Empire, Hagelin attended Lundsberg boarding school and late ...
. Originally called AB Cryptoteknik and founded by
Arvid Gerhard Damm Arvid, Arved, Arnvid or Arvydas is a male given name, most common in Scandinavia but also in Iran and Lithuania. In Scandinavia it is derived from Old Norse and means "forest of eagles" or 'eagle wood'. Arvid is a royal male name that is composed ...
in
Stockholm Stockholm () is the capital and largest city of Sweden as well as the largest urban area in Scandinavia. Approximately 980,000 people live in the municipality, with 1.6 million in the urban area, and 2.4 million in the metropolita ...
in 1920, the firm manufactured the C-36 mechanical cryptograph machine that Damm had patented. After Damm's death, and just before the
Second World War World War II or the Second World War, often abbreviated as WWII or WW2, was a world war that lasted from 1939 to 1945. It involved the vast majority of the world's countries—including all of the great powers—forming two opposing ...
, Cryptoteknik came under the control of Hagelin, an early investor. Hagelin's hope was to sell the device to the
United States Army The United States Army (USA) is the land service branch of the United States Armed Forces. It is one of the eight U.S. uniformed services, and is designated as the Army of the United States in the U.S. Constitution.Article II, section 2, ...
. When Germany invaded Norway in 1940, he moved from Sweden to the US and presented the device to the military, which in turn brought the device to the
Signal Intelligence Service The Signal Intelligence Service (SIS) was the United States Army codebreaking division through World War II. It was founded in 1930 to compile codes for the Army. It was renamed the Signal Security Agency in 1943, and in September 1945, became th ...
, and the code-breakers in
Arlington Hall Arlington Hall (also called Arlington Hall Station) is a historic building in Arlington, Virginia, originally a girls' school and later the headquarters of the United States Army's Signal Intelligence Service (SIS) cryptography effort during Worl ...
. In the end he was awarded a licensing agreement. 140,000 units were made during the war for American troops. During his time in
United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territo ...
, Hagelin became close friends with
William F. Friedman William Frederick Friedman (September 24, 1891 – November 12, 1969) was a US Army cryptographer who ran the research division of the Army's Signal Intelligence Service (SIS) in the 1930s, and parts of its follow-on services into the 1950s. In ...
, who in 1952 became chief cryptologist for the
National Security Agency The National Security Agency (NSA) is a national-level intelligence agency of the United States Department of Defense, under the authority of the Director of National Intelligence (DNI). The NSA is responsible for global monitoring, collectio ...
(NSA) and whom Hagelin had known since the 1930s. The same year, Hagelin's lawyer, Stuart Hedden, became deputy commander in
CIA The Central Intelligence Agency (CIA ), known informally as the Agency and historically as the Company, is a civilian foreign intelligence service of the federal government of the United States, officially tasked with gathering, processing, ...
, Inspector General. In 1948 Hagelin moved to Steinhausen in Switzerland to avoid taxes. In 1952 the company, which until then had been incorporated in Stockholm, also moved to Switzerland. The official reason was that it was transferred as a result of a planned Swedish government nationalization of militarily important technology contractors. A holding company was set up in Liechtenstein. During the 1950s, Hagelin and Friedman had frequent mail correspondence, both personal and business alike. Crypto AG sent over new machines to the NSA and they had an ongoing discussion concerning which countries they would or would not sell the encryption systems to, and which countries to sell older, weaker systems. In 1958 when Friedman retired, Howard C. Barlow, a high-ranking NSA employee, and Lawrence E. Shinn, NSA's signal intelligence directory in Asia, took over the correspondence. In June 1970, the company was bought in secret by the CIA and the West-German intelligence service, BND, for $5.75 million. This was effectively the start of Operation Rubikon. Hagelin had first been approached to sell to a partnership between the French and West-German intelligence services in 1967, but Hagelin contacted CIA and the Americans did not cooperate with the French. At this point, the company had 400 employees and the revenue increased from 100,000
Swiss franc The Swiss franc is the currency and legal tender of Switzerland and Liechtenstein. It is also legal tender in the Italian exclave of Campione d'Italia which is surrounded by Swiss territory. The Swiss National Bank (SNB) issues banknotes and the fe ...
in the 1950s to 14 million Swiss franc in the 1970s. In 1994, Crypto AG bought InfoGuard AG a company providing encryption solutions to banks. In 2010, Crypto AG sold G.V. LLC, a Wyoming company providing encryption and interception solutions for communications. In 2018, Crypto AG was liquidated, and its assets and intellectual property sold to two new companies. CyOne was created for Swiss domestic sales, while Crypto International AG was founded in 2018 by Swedish entrepreneur Andreas Linde, who acquired the brand name, international distribution network, and product rights from the original Crypto AG. In 2020, it was established following a parliamentary investigation that the Swiss government and its intelligence services were aware of the spying activities of Swiss-based Crypto for many years and had "benefited from the US-led spying". The company and its history were the subject of
BBC Radio 4 BBC Radio 4 is a British national radio station owned and operated by the BBC that replaced the BBC Home Service in 1967. It broadcasts a wide variety of Talk radio, spoken-word programmes, including news, drama, comedy, science and history fro ...
's ''
Archive on 4 An archive is an accumulation of historical records or materials – in any medium – or the physical facility in which they are located. Archives contain primary source documents that have accumulated over the course of an individual or ...
'' programme in May 2021.


Products

The company had radio, Ethernet, STM, GSM, phone and fax encryption systems in its portfolio. Machines: * C-52 * CX-52 *
CD-57 The (Hagelin) CD-57 was a portable, mechanical cipher machine manufactured by Crypto AG, first produced in 1957. It was derived from the earlier CD-55, and was designed to be compatible with the larger C-52 machines. Compact, the CD-57 measured ...
* HX-63


Compromised machines

According to declassified (but partly redacted) US government documents released in 2015, in 1955 (just after encryption was added to the US Munitions List on November 17, 1954) Crypto AG's founder Boris Hagelin and William Friedman entered into an unwritten agreement concerning the C-52 encryption machines that compromised the security of some of the purchasers. Friedman was a notable US government cryptographer who was then working for the
National Security Agency The National Security Agency (NSA) is a national-level intelligence agency of the United States Department of Defense, under the authority of the Director of National Intelligence (DNI). The NSA is responsible for global monitoring, collectio ...
(NSA), the main United States
signals intelligence Signals intelligence (SIGINT) is intelligence-gathering by interception of '' signals'', whether communications between people (communications intelligence—abbreviated to COMINT) or from electronic signals not directly used in communication ...
agency. Hagelin kept both NSA and its United Kingdom counterpart,
Government Communications Headquarters Government Communications Headquarters, commonly known as GCHQ, is an intelligence and security organisation responsible for providing signals intelligence (SIGINT) and information assurance (IA) to the government and armed forces of the Unit ...
(GCHQ), informed about the technical specifications of different machines and which countries were buying which machines. Providing such information would have allowed the intelligence agencies to reduce the time needed to crack the encryption of messages produced by such machines from impossibly long to a feasible length. The secret relationship initiated by the agreement also involved Crypto AG not selling machines such as the CX-52, a more advanced version of the C-52, to certain countries; and the NSA writing the operations manuals for some of the CX-52 machines on behalf of the company, to ensure the full strength of the machines would not be used, thus again reducing the necessary cracking effort. Crypto AG had already earlier been accused of rigging its machines in collusion with intelligence agencies such as NSA, GCHQ, and the German
Federal Intelligence Service The Federal Intelligence Service (German: ; , BND) is the foreign intelligence agency of Germany, directly subordinate to the Chancellor's Office. The BND headquarters is located in central Berlin and is the world's largest intelligence he ...
(BND), enabling the agencies to read the encrypted traffic produced by the machines. Suspicions of this collusion were aroused in 1986 following US president Ronald Reagan's announcement on national television that, through interception of diplomatic communications between
Tripoli Tripoli or Tripolis may refer to: Cities and other geographic units Greece *Tripoli, Greece, the capital of Arcadia, Greece *Tripolis (region of Arcadia), a district in ancient Arcadia, Greece * Tripolis (Larisaia), an ancient Greek city in t ...
and the Libyan embassy in
East Berlin East Berlin was the ''de facto'' capital city of East Germany from 1949 to 1990. Formally, it was the Soviet sector of Berlin, established in 1945. The American, British, and French sectors were known as West Berlin. From 13 August 1961 ...
, he had irrefutable evidence that
Muammar Gaddafi Muammar Muhammad Abu Minyar al-Gaddafi, . Due to the lack of standardization of transcribing written and regionally pronounced Arabic, Gaddafi's name has been romanized in various ways. A 1986 column by ''The Straight Dope'' lists 32 spelling ...
of Libya was behind the
West Berlin discotheque bombing On 5 April 1986, three people were killed and 229 injured when ''La Belle'' discothèque was bombed in the Friedenau district of West Berlin. The entertainment venue was commonly frequented by United States soldiers, and two of the dead and 7 ...
in 1986. President Reagan then ordered the bombing of Tripoli and
Benghazi Benghazi () , ; it, Bengasi; tr, Bingazi; ber, Bernîk, script=Latn; also: ''Bengasi'', ''Benghasi'', ''Banghāzī'', ''Binghāzī'', ''Bengazi''; grc, Βερενίκη ('' Berenice'') and ''Hesperides''., group=note (''lit. Son of he Ghaz ...
in retaliation. Further evidence suggesting that the Crypto AG machines were compromised was revealed after the assassination of former Iranian Prime Minister
Shapour Bakhtiar Shapour Bakhtiar ( fa, شاپور بختیار, ; 26 June 19146 August 1991) was an Iranian politician who served as the last Prime Minister of Iran under the Mohammad Reza Shah Pahlavi. In the words of historian Abbas Milani: "more than once in ...
in 1991. On 7 August 1991, one day before Bakhtiar's body was discovered, the Iranian Intelligence Service transmitted a coded message to Iranian embassies, inquiring "Is Bakhtiar dead?" Western governments deciphered this transmission, causing the Iranians to suspect their Crypto AG equipment. The Iranian government then arrested Crypto AG's top salesman, Hans Buehler, in March 1992 in
Tehran Tehran (; fa, تهران ) is the largest city in Tehran Province and the capital of Iran. With a population of around 9 million in the city and around 16 million in the larger metropolitan area of Greater Tehran, Tehran is the most popul ...
. It accused Buehler of leaking their encryption codes to Western intelligence. Buehler was interrogated for nine months but, being completely unaware of any flaw in the machines, was released in January 1993 after Crypto AG posted bail of $1m to Iran. Soon after Buehler's release Crypto AG dismissed him and sought to recover the $1m bail money from him personally. Swiss media and the German magazine ''
Der Spiegel ''Der Spiegel'' (, lit. ''"The Mirror"'') is a German weekly news magazine published in Hamburg. With a weekly circulation of 695,100 copies, it was the largest such publication in Europe in 2011. It was founded in 1947 by John Seymour Chaloner ...
'' took up his case in 1994, interviewing former employees and concluding that Crypto's machines had in fact repeatedly been rigged. Crypto AG rejected these accusations as "pure invention", asserting in a press release that "in March 1994, the Swiss Federal Prosecutor's Office initiated a wide-ranging preliminary investigation against Crypto AG, which was completed in 1997. The accusations regarding influence by third parties or manipulations, which had been repeatedly raised in the media, proved to be without foundation." Subsequent commentators were unmoved by this denial, stating that it was likely that Crypto AG products were indeed rigged. ''
Le Temps ''Le Temps'' (literally "The Time") is a Swiss French-language daily newspaper published in Berliner format in Geneva by Le Temps SA. It is the sole nationwide French-language non-specialised daily newspaper of Switzerland. Since 2021, it has b ...
'' has argued that Crypto AG had been actively working with the British, US and West German secret services since 1956, going as far as to rig instruction manuals for the machines on the orders of the NSA. These claims were vindicated by US government documents declassified in 2015. In 2020, an investigation carried out by ''
The Washington Post ''The Washington Post'' (also known as the ''Post'' and, informally, ''WaPo'') is an American daily newspaper published in Washington, D.C. It is the most widely circulated newspaper within the Washington metropolitan area and has a large nat ...
'',
Zweites Deutsches Fernsehen ZDF (, short for Zweites Deutsches Fernsehen; ; "Second German Television") is a German public-service television broadcaster based in Mainz, Rhineland-Palatinate. It is run as an independent nonprofit institution, which was founded by all fe ...
(ZDF), and
Schweizer Radio und Fernsehen Schweizer Radio und Fernsehen (SRF; "Swiss Radio and Television") is a Swiss broadcasting company created on 1 January 2011 through the merger of radio company Schweizer Radio DRS (SR DRS) and television company Schweizer Fernsehen (SF). The n ...
(SRF) revealed that Crypto AG was, in fact, entirely controlled by the CIA and the BND. The project, initially known by codename "Thesaurus" and later as "Rubicon" operated from the end of the Second World War until 2018. The Swiss government's decision to impose export controls on Crypto International AG in the wake of the Crypto AG disclosures caused diplomatic tensions with Sweden, reportedly leading to the latter cancelling plans to celebrate 100 years of diplomatic relations with Switzerland. The export controls preventing Swedish authorities from obtaining equipment from Crypto International was reportedly a reason behind Sweden's decision.


See also

*
Katharine Gun Katharine Teresa Gun (''née'' Harwood) (born 1974) is a British linguist who worked as a translator for the Government Communications Headquarters (GCHQ). In 2003, she leaked top-secret information to ''The Observer'', concerning a request by ...
* Operation Rubicon (Crypto AG) *
Spying on United Nations leaders by United States diplomats Spying on United Nations leaders by United States diplomats was confirmed by a 2009 confidential directive from the United States Department of State directly instructing US diplomats to spy on top officials of the United Nations. The intelligence i ...


References


External links

* Website of the ne
Crypto International AG
located in the same location as the old company in Steinhausen/Zug (since 2018)

an

at the Cryptomuseum
The intelligence coup of the century
by Greg Miller at the Washington Post offering details on CIA's involvement with Crypto AG *''La Suisse sous couverture, Episode 1 , Agents infiltrés'', Radio Télévision Suisse , November 2019 (link t
Youtube
with subtitles in English) {{Authority control Cryptography companies Defence companies of Switzerland Defunct companies of Switzerland Technology companies established in 1952 Technology companies disestablished in 2018 Central Intelligence Agency front organizations Swiss companies established in 1952 Swiss companies disestablished in 2018