97. Selling The World's Secrets: Why The Brits Won The Falklands War (Ep 2)

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Speaker 3 David, David, I've got some top secret information to share with you today. Oh, Gordon,

Speaker 1 what have you done this time? Don't worry, don't worry.

Speaker 3 It's good news.

Speaker 3 So I'm excited to share, and I think actually you know this news already, but it's really to share with everyone listening, that we are going to be putting on our first ever live show on the 31st of January, 2026 at the South Bank Centre in London.

Speaker 3 Luckily, the date and location aren't secret.

Speaker 1 Which is wonderful because we'll finally have an opportunity in person to discuss why you are so terribly wrong and morally misguided about Edward Snowden and the JFK assassination.

Speaker 3 Well, I look forward to proving you wrong live on stage. But yes, we'll be delving into the weird and wonderful world of intelligence failures and maybe some conspiracy theories as well.

Speaker 3 And we'll be unpacking some iconic moments of spy fiction from those thrillers and dramas that people love. And we'll be answering your most burning questions about the world of spies and secrets.

Speaker 1 That's right. The wonderful world of intelligence failures.
Nothing more wonderful than an intelligence failure.

Speaker 3 And if...

Speaker 1 listeners want finally to get their questions answered about Gordon's home address, I'll be happy to share it with you live on stage.

Speaker 1 But Gordon, when can our fantastic listeners and our secret squirrels get tickets for this exciting event?

Speaker 3 Well, members of the declassified club, the famed secret squirrels, can get members-only pre-sale tickets live from tomorrow, Thursday, 6th of November at 10 a.m.

Speaker 3 GMT, while the general sale for everyone else will be from Friday, the 7th of November at 12 p.m. GMT.

Speaker 3 Now, the links for the general sale tickets will be in the description for this episode, and the rest is classified.com.

Speaker 3 So make sure you're signed up for alerts to be the first person to secure your spot at the most anticipated espionage event of 2026.

Speaker 1 And with that, back to the nutty story of Crypto AG.

Speaker 1 Hello, welcome to the Rest of Sclassify. I'm David McCloskey, and I'm Gordon Carrera.
And the question, Gordon,

Speaker 1 is,

Speaker 1 what do you do if you're the CIA and you're running a cryptology company in Switzerland and the CEO is about to retire and his son and likely successor has absolutely no idea that the CIA is involved.

Speaker 3 You hope you can get him on board, but what happens if you don't? I guess that's what we were about to find out in the second part of our series on crypto AG.

Speaker 1 Oh, you've set it up in a very conspiratorial way, Gordon.

Speaker 3 I have.

Speaker 1 As usual, I'd expect nothing less from you. That's right.
We're telling the story in this second and final episode of our dive into this

Speaker 1 insane sort of intelligence story around Crypto AG,

Speaker 1 a Swiss cryptology company that when we left you last in the process of sort of being absorbed by the Central Intelligence Agency.

Speaker 1 And we looked last time at this really, I think, remarkable friendship between Boris Hagelin.

Speaker 1 the founder and CEO of Crypto AG, and William Friedman, this sort of cryptology and signals intelligence pioneer in the U.S.

Speaker 1 who worked for the NSA and this friendship at the heart of this, what becomes a partnership that allowed the U.S.

Speaker 1 to gain access to encryption machines that are sold around the world to over 130 countries. But now, Gordon, these guys are old.
Friedman is retiring. Hagelin, it's the 1960s.

Speaker 1 He's thinking it's time to step down. He's getting close to 70.
And the NSA, NSA,

Speaker 1 where Friedman had worked and had been more or less running this operation up to this point, is kind of uncomfortable, maybe with the human touch that's required.

Speaker 1 And the Central Intelligence Agency has, you wrote, muscled in, but I like to say starting to sweep this company right off its feet.

Speaker 3 Every stereotype about NSA and CIA people

Speaker 3 could come into this episode.

Speaker 3 So we've had this amazing operation where the NSA has been able to work, you know, thanks to this friendship, to basically rig the sale of all of these machines around the world.

Speaker 3 But the crucial question is, Boris Hagelin wants to retire. So it becomes a question of succession.

Speaker 3 And this has got echoes of the TV series and some of those questions, because Boris Hagelin has got a son, Bo Jr.,

Speaker 3 good name, and he's definitely viewed as the successor. He's been groomed as such.
He's a capable inventor himself.

Speaker 3 He invents a kind of pocket-sized cipher machine you can carry around, but actually has a little bit of a battle with his father over who gets credit for that.

Speaker 3 And you can sense from that, there's some strains between them. Beau doesn't know what his father has been doing.

Speaker 3 The gentleman's agreement with William Friedman that's grown into a more kind of formal arrangement. The father has certainly kept it from the son, which I think is interesting.

Speaker 1 The more we talk about the story, the more sort of flummoxed I am by Hegeland Sr.'s motivations, because I guess it's just one thing at a time and that he ends up at this place in the 60s where he's trying to hand off a company that he's built in secret partnership with American intelligence.

Speaker 1 He's potentially handing this off to his son. But Hegel Sr.
has put so much at risk in this operation, but his entire business is potentially at the same time.

Speaker 3 It's kind of built on a lie. Yeah.
It's built on a lie.

Speaker 1 He must have been so

Speaker 1 ideologically committed, I think.

Speaker 1 to this and probably got some secret thrills out of it that he was willing to continue continue with it. Just it's immense risk.
And Bo Jr.

Speaker 3 actually goes to the US himself and he's working as a sales manager for the Americas, for the company. But the tensions kind of start to grow with the father.
Bo Jr.

Speaker 3 marries an American woman called Edith, who his parents don't like, familiar story. They think she's keeping him from coming back to Switzerland to be where the headquarters are.

Speaker 3 They think he's careless with money because he wants more. He wants to be a playboy, perhaps, but the father doesn't really give him enough money.

Speaker 3 It's the kind of, it feels like one of those classic generational succession stories.

Speaker 3 You know, the father has built the business and he's worried that the son doesn't have the kind of the work ethic and what it takes to kind of maintain it and to keep it going in the same way as he's built.

Speaker 3 It's an age-old story, isn't it? But you can sense that's part of the tension between father and son. And, you know, the father thinks the son's not really putting his weight.

Speaker 3 He's enjoying himself too much. So, yeah, it's Logan Roy and the family and the drama succession, isn't it?

Speaker 1 And Bo is actually a pretty good salesman. And

Speaker 1 because

Speaker 1 he doesn't know about his father's secret with the CIA, with the Americans, starts to sell really advanced borderline unbreakable machines to countries that we would really all prefer they wouldn't so that we could listen to their communications.

Speaker 3 I mean, anyway, you can't blame him because he's thinking like, hey, it kind of goes to the Brazilians and is thinking new market. And he starts selling in 1960 like the top machines.

Speaker 3 But the problem is, these are the machines that are not supposed to be sell to anyone other than kind of NATO and allied countries. You know, it's the CX-52.
And so the US kind of freaks out.

Speaker 3 They're like, well, we won't be able to read Brazilian messages anymore.

Speaker 3 So then Boris, you know, has to kind of get involved and convince Brazilians to instead buy a model that, you know, can be read. So the issue is he's due to take over, but can he be trusted?

Speaker 3 Not everyone is sure. US intelligence describe him as a wild card and wonder if the deal is going to survive the succession.

Speaker 3 You know, and that grows as the 60s progress and as Boris Hagler gets older and what's going to happen to the company, is it going to be able to adapt to a kind of new machines, electronic machines?

Speaker 3 So at this point, the first signs of a new plan is hatched, which is that Boris is going to sell the company. And he doesn't tell his son who he's going to sell it to, but he talks about selling it.

Speaker 3 But the reality is he's thinking about selling it to the CIA. And not openly, but through a series of front companies.
And only three people are aware of the plans to sell the company. Boris,

Speaker 3 the CEO, and Bo Jr. But Bo Jr.
doesn't know that it's the CIA.

Speaker 1 Because we should say by this point, Boris Sr. is not the CEO.

Speaker 3 Yeah, exactly. He's kind of stepped back.
Yeah. And so Bo is already kind of probably annoyed because he thought he'd be the CEO and he's not happy with the sale.
So there's a kind of problem.

Speaker 3 And then

Speaker 3 1970. The problem to some extent goes away because Bo, Bo Jr., dies in a car crash on the Washington Beltway, just outside of D.C.

Speaker 1 Now, okay, you've said this in very, you know, sort of dark tones here, Gordon.

Speaker 3 Officially, there is no sign of the case. The Beltway is very dangerous.

Speaker 1 People die on the Beltway all the time. But you wrote down there are a strange lack of details on the crash.
What does that imply? What are you suggesting?

Speaker 3 I tried to find out, like, tell me more about the crash, who else was in. You can't find any details about it.

Speaker 1 What would be an appropriate set of details to have have on a

Speaker 3 random car crash in 1970?

Speaker 1 How deep down in the rabbit hole of a young businessman?

Speaker 3 I'm not trying to revisit my JFK assassination theories about the CIA. How do you limit it? That's good.

Speaker 3 But

Speaker 3 it is incredibly convenient. that Beau Jr.
dies. Now, I mean, look, some in European intelligence are going to wonder if something happened.

Speaker 3 Boris himself is going to wonder what happened with his son. He's going to hire private detectives detectives to try and find out if there's something more to it.
I,

Speaker 3 you know, others I've spoken to say they just can't believe the CIA or someone would have bumped off someone like that, even if they have the potential to screw up a world-changing intelligence operation.

Speaker 1 Okay, we should say, I mean, you've, you've covered this in sort of a

Speaker 1 gloss of paranoid conspiracy, Gordon.

Speaker 3 It's the 70s. We're in the 70s now.

Speaker 1 It's, yeah, we're in the 70s. There's absolutely no evidence of foul play here, right?

Speaker 3 There's not evidence of it.

Speaker 1 It is true that it sets the stage for the CIA to take over crypto aging. I mean, Bo Jr.
was a potential hurdle on that path, and he's now out of the picture.

Speaker 3 So it's so interesting, this bit, which is how does the CIA, and we flagged also the Germans, come to buy it.

Speaker 3 Now, as we said before, the NSA had kind of got less interested in this, partly because their top target is the Soviet Union, and they're not using haggling machines, and they're kind of focused on computing power.

Speaker 3 And the CIA is kind kind of very interested in this. And I guess it's fair to say, isn't it?

Speaker 3 The CIA has always had a little bit of a little bit of game in that kind of communications intelligence, signals intelligence world, hasn't it? It's not that it always leaves it to the NSA.

Speaker 1 Well, yeah, I mean, I guess a couple examples.

Speaker 1 One that comes immediately to mind is the Berlin Tunnel operation run by a friend of the pod, Bill Harvey.

Speaker 3 Later involved in the JFK assassination, allegedly.

Speaker 1 Alleged by Gordon Guerrero and other

Speaker 3 conspiracy theorists. Yes.

Speaker 1 i've added that to your nut file gordon um so that that bullet point has been added

Speaker 3 file um but yeah so the the berlin tunnel was was cia digging a tunnel into the soviet sector of of berlin wasn't it to literally tap the communications it also reminds me of an operation gordon we mentioned briefly in our series on adolf Tolkachev, the so-called billion-dollar spy.

Speaker 1 The code name for this one, I believe it was GT TA,

Speaker 1 and it was an effort by the CIA to essentially, it would send someone down into

Speaker 1 like a manhole outside of Moscow and place a caller on a communications line that the Soviet, I think the Soviet Ministry of Defense used.

Speaker 1 And so there you had this example of the agency essentially, I mean, tapping a communications line, collecting signals intelligence from that, but at the core of the operation is a human, right?

Speaker 1 It's a CI officer who's responsible for maintaining that collar and all of the tapes associated with it.

Speaker 1 What is often not well understood about signals intelligence is how much of it is human enabled in some way. Like you go through the chain of the operation and how the stuff is physically collected.

Speaker 1 And at some point, there's a human involved in the process, right? And oftentimes, the access that that human has has been, you know, sort of curated by the CIA, right? And it's a natural fit.

Speaker 1 So there's more of

Speaker 1 a partnership, I think, between the CIA and the NSA on signals intelligence than is often well understood.

Speaker 3 Yeah, because even if you go back to Stuxnet, the virus that gets into the Iranian system, at one point, they're getting a human engineer to put a USB stick into an Iranian computer.

Speaker 3 You need a person to do that.

Speaker 3 And I guess that's the point, you know, about this operation, is that yes, it's about collecting communications intelligence, but it's actually, as we've established, about managing people, salesmen, engineers, persuading other countries to buy and trust things.

Speaker 3 And I guess that's why the CIA feels more kind of comfortable with it maybe. than the NSA did.
Now, but the other question is, how come the Germans? Now,

Speaker 3 this is really interesting because it seems like some Western European services knew or had worked out what was going on with Hagelin.

Speaker 3 And in 1967, the French approached Hagelin to buy the company with the Germans. But Hagelin says no and tells the CIA, because obviously he's got a relationship with them.
And then I love this.

Speaker 3 The CIA director, Richard Helms, another friend of the pod, says to the Germans, if you ditch the French, we'll buy it with you. And it's basically, I think it's fair to say

Speaker 3 the CIA are like, yeah, yeah, yeah, it's a good idea buying it. But I think we're the ones to do that.

Speaker 3 Because I think it's fair to say the CIA and the French did not entirely trust each other at this point.

Speaker 1 That's shocking.

Speaker 3 The relationship with the Germans, though, between the BND and the CIA is

Speaker 3 much closer, though, isn't it? When you look back on it, it's interesting, isn't it? Because the BND, obviously, after the Second World War, Germany needs a new intelligence service.

Speaker 3 The old Gestapo and the military intelligence is gone. And it's basically founded by the CIA.
And it's kind of the CIA half-running it for them. It's their people.

Speaker 3 They've got deep relationships with the Germans in that kind of early Cold War period. So it kind of makes sense, doesn't it, that, you know, CIA and BND kind of trust each other.

Speaker 3 And then there were other reasons why I thought it was interesting why the CIA would be happy working with the Germans.

Speaker 3 I mean, one of them is that, you know, you've got a company which is based in Switzerland, so obviously neighboring Germany, and you're going to need engineers and people to help.

Speaker 3 And it's a lot easier if you've got the Germans on board and you can send some engineers from Siemens, the company.

Speaker 3 It's a kind of German company which German intelligence is going to have a relationship relationship with, you can send them over and to kind of deal with it.

Speaker 3 And you can have people going back and forth in a way that looks a lot less suspicious than a bunch of Americans turning up at Crypto AG headquarters to talk to them or to deal with it.

Speaker 3 You know, you can see why there's a kind of benefit to keeping it covert if you use the Germans as a partner.

Speaker 1 I mean, think if the French were already onto it, that the Germans also had some understanding that the agency was involved at this point and that Hagelin had been collaborating with the Americans.

Speaker 1 So, I mean, if they're not included, is there potential that they raise a fuss about it and maybe word gets out or something like that? The BND probably already knew.

Speaker 3 Yeah, I think so, too. And it's interesting, I think the Swedes know because, of course, Hagelin is Swedish and the company originated in Sweden.

Speaker 3 So there's a bit of knowledge around, and it's interesting they do keep it quiet.

Speaker 3 But the CIA and BND are going to go halves on it, sale for about $5.75 million to buy the company, organized through lawyers, shell companies, and Liechtenstein.

Speaker 3 So it's not like, you know, the CIA kind of on the company's records, it says, you know, bought by CIA VND.

Speaker 1 This is part of the reason why, even now, a lot of the details are so murky, is that a lot of our understanding of this is coming from work by journalists that's been done really just in the past six or seven years and some CIA write-ups on the history of this operation that are still not declassified, but that journalists have gotten access to.

Speaker 1 But the other angle for the secrecy is that it's really hard to understand this Liechtenstein component because a lot of this stuff is, it's such a maze and it's still hard to get down into the roots of the documentation in Liechtenstein.

Speaker 3 Yeah, and the shell companies and whatever else was there. And so all the staff of the company, Crypto AG, don't know who owns it, which is kind of nuts.

Speaker 3 I mean, they think it's some business, you know, kind of group, I guess, one of these shell companies. So only Boris Hagelin and the CEO know about it.

Speaker 3 All the profits go through Liechtenstein and then come to Munich. And well, I love this fact.

Speaker 3 The BND pick it up and they pick up a load of cash and they hand it over in an underground car park in Munich to the CIA, who are kind of running an operation out of the consulate in the city.

Speaker 3 I mean, you just imagine literally bags of cash being handed over in an underground car park. I mean, it's crazy.

Speaker 1 You would think, you know, two services running a joint operation, there is going to be...

Speaker 1 tension and misunderstanding and, you know, differences of perspective. But I was amused to see that the CIA thought the BND was primarily using this as a money-making operation for the service.

Speaker 3 Yeah, the tension grows because the CIA think, well, the Germans just seem to be more worried about the money than the spying.

Speaker 3 But I love the fact the Germans are shocked, shocked that America is using this to spy on lots of countries that appear to be allies, including NATO members, like Spain, Greece, Turkey, and Italy.

Speaker 3 And I just love, and of course, you know, you're the Germans, you're like, there are European partners.

Speaker 1 Long tradition of Germans being shocked by spying on allies, which I think is total garbage, personally. They are very good at play acting.

Speaker 1 The shocked partner. Oh, my goodness.
We're

Speaker 1 spy on the Greeks.

Speaker 3 Gambling in this casino. Yeah.
So

Speaker 3 through the 70s, the operation is still going to be very successful. So again, just a few quick examples of the success of it.
Egypt is a big customer.

Speaker 3 1978, President Sadat of Egypt taking part in the Camp David negotiations with Israel, brokered by the US, and all the Egyptian communications back to advisors in Cairo from Camp David are monitored because they're using crypto-AG machines.

Speaker 3 They can see what the Egyptians' bottom line is. You know, and this is described as priceless intelligence.
So again, you get a sense of the value of this. Following year 1979, Iran hostage crisis.

Speaker 3 NSA is reading about 85% of Iranian comms. Although it's interesting because they're still taken by surprise.

Speaker 1 And Bobby Inman, who is head of the NSA at this time,

Speaker 1 has said on the record, I think, to journalists at the Washington Post, that during, I think it was during the Camp David negotiations, that the NSA was able...

Speaker 1 through providing the transcripts of these diplomatic communications and sort of the back and forth between Sadat, who's negotiating, and then his advisors, presumably some of whom are in Cairo, that he was able to answer well over 80% of the White House's questions on sort of how the Egyptians were positioning themselves.

Speaker 1 So Inman basically said it was absolutely critical intelligence to have and

Speaker 1 so, so valuable. I also found a great story from this period, Gordon.

Speaker 1 Billy Carter, who is the sort of boorish brother to then President Jimmy Carter, and who also Gordon famously promoted something called Billy Beer in the United States. Did you ever have Billy Beer?

Speaker 3 Never had Billy Beer. I haven't either.

Speaker 1 I think you can collectors still try to get the cans. Essentially, he was using his access to the White House and the Carter name to make money.
There's an intercept

Speaker 1 of Libyan communications in this period that show that Billy Carter was on Gaddafi's payroll as a kind of, you know, lobbyist, right? Getting access to the White House.

Speaker 1 And Inman, who is the NSA director at the time, sees this intercept and is like, oh, crap. You know, like, what do I do?

Speaker 3 What do I do?

Speaker 1 And goes to the Justice Department and

Speaker 1 they approach Billy Carter and he denies it. He just lies.
And eventually they work out a deal where he has to register as a foreign agent.

Speaker 1 But that whole chain of events is because the Libyans are using crypto AG machines.

Speaker 3 And that's the thing. There's so much we don't know.
I mean, the other bit that's interesting, I think, is it's being used a lot in Latin America.

Speaker 3 And in the 1970s, you get this wave where countries are overthrown by some pretty brutal military hunters and kind of dictatorships emerge where they're going to use repression against their political enemies and their own people.

Speaker 3 And these militaries that take over are using crypto-AG to communicate. And I think a lot of researchers have raised the question, well, does that then mean that the U.S.

Speaker 3 government knew exactly what these militaries were doing in terms of, you know, repressing their own people?

Speaker 3 So Salvador Allende gets overthrown by the Chilean military led by General Pinochet with CIA help, it's worth saying, and thousands are killed.

Speaker 3 Then you get the same in Argentina, you know, where Junta takes over in 77, people are getting thrown out of airplanes, dissidents have disappeared, all these things.

Speaker 3 And it does raise the question, well, does that mean the U.S. knew all about what these militaries were doing against their own people? Because they were inside their comms because of crypto-AG.

Speaker 1 Well, that's right, Gordon. I think maybe there you mentioned Argentina, which is going to be so...
critical to how this operation almost entirely unravels. So let's take a break.

Speaker 1 When we come back, we'll see how the CIA, hopefully, Gordon, manages to hold this entire thing together.

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Speaker 1 Well, welcome back. Gordon, we left on the cliffhanger that Argentina was going to almost screw this entire thing up.

Speaker 1 But before we get there, Gordon, I think it's fair to say that in the 1970s, Mo Money, Mo problems, as they say, right? For the good folks at Crypto AG.

Speaker 3 Yeah, it's really interesting. So in the 70s, it seems to be motoring along, but you can start to see the tensions, which are actually going to lead to the unraveling of this operation.

Speaker 3 Crypto AG, big company, successful company, 250 people. But of course, some of the engineers inside the company are getting a little bit suspicious about things that they don't know.

Speaker 3 You know, where do some of the algorithms come from? Why are some of the flaws in the machines not being fixed? You know, it's getting harder to keep this all secret.

Speaker 3 And one of the reasons is the staff are frankly doing their job. Like the engineers are seeing a problem of vulnerability and they're fixing it.
And interesting things start to happen.

Speaker 3 They're reading the Syrian codes. And then in 1977, the NSA complaints suddenly they can't read them anymore.
And the reason is that one engineer from the company.

Speaker 3 has seen some complaints from Damascus and he goes and just fixes it. He's doing his job, but he basically gets fired.
Partly because he's suspicious about what's going on.

Speaker 3 And, you know, the CIA is actually a bit annoyed about this because they think maybe it'd be better to keep him on the payroll to keep him quiet.

Speaker 3 And you get other engineers who are kind of aware of something secret. They're going to start drinking.

Speaker 3 They're going to start telling their family, you know, these crazy, what sound like conspiracy theories that they're spies behind the company and people think they're nuts.

Speaker 3 the company is going to start hiring engineers, you know, one who's described as too bright to remain unwitting. And it's a woman who starts to build more secure machines.

Speaker 3 When countries buy these machines i mean they're not just going to buy them and trust a company they check them so they get their security experts to kind of look at the machines take them apart check the codes and they start to you know have suspicions and argentina is one of them after 77 the military officers who've taken over the country start to suspect something and they summon the ceo of crypto ag who does know about the deal to come out to argentina in 79 and he's frightened out of his wits because he kind of thinks they're onto onto this.

Speaker 3 This is a kind of a group of people who throw people out of airplanes and kill people. And so he kind of manages to convince them, well done for spotting this vulnerability.
We'll fix it.

Speaker 3 And of course, he's going to fix it in a way they can still read it. And it's interesting because the Argentines will keep quiet about it because now they realize there is this vulnerability.

Speaker 3 They think, oh, maybe we can use that to spy on the Chileans who are using the machines. So they actually keep quiet about the fact that there was a problem with it.

Speaker 3 So you've got this growing tension. And I think it's interesting because the BND and CIA realize they've got to kind of manage the relationship and particularly with the engineers.

Speaker 3 And that's going to be the kind of one of the next stages.

Speaker 1 Do we know, Gordon, how the CIA and the BND were interacting with the CEO at the time and like with the witting members of the company? I mean, what was the actual dance like?

Speaker 1 Because it does seem this is a complicated intelligence operation. It's gone well beyond the kind of one-man show that it was when, you know, Boris Sr.

Speaker 1 and William Friedman had agreed on their sort of gentleman's understanding. Like, do we know what the architecture is right now for how the CIA and BND run it?

Speaker 3 I mean, the CIA are using a kind of the consulate in Munich, and, you know, they've literally got someone there who's assigned to deal with this.

Speaker 3 But the problem is you have got people who are kind of coming out of meetings looking a bit mysterious.

Speaker 3 And one of the interesting things is that the CIA and BND realize they're actually going to need someone inside the company to kind of manage the engineering side because it's just too difficult.

Speaker 3 Too many people are finding out about it. So in 1980, they actually get the company to hire a maths professor from Stockholm who's going to be given a CIA code name, Athena, because that's...

Speaker 3 going to be their person inside the company who can kind of be used to explain away problems and who can know about the deal.

Speaker 3 And that's going to be the vital person who's going to kind of go out to Argentina and other places and kind of persuade them that everything's fine and you don't need to worry.

Speaker 1 I was pleased to see a codename appear in here, Gordon, because I think so far you have downplayed the codename game inside this operation.

Speaker 1 Because in the cable traffic, Crypto AG is referred to as Minerva, right?

Speaker 1 That's the code name. The overall operation is called Rubicon by the time you get to the, I think the late 70s.
But, but Gordon, it had a terrible codename at birth, which was Thesaurus, which I find

Speaker 1 very boring and bookish. And Rubicon is much more exciting.

Speaker 3 I'm going to guess NSA came up with thesaurus and CIA came up with Rubicon, but I don't know. Again, sorry, NSA.
That's a good guess, I think.

Speaker 1 That's a good guess.

Speaker 3 Interesting enough, the Falklands War, 1982.

Speaker 3 when Argentina takes the Falkland Islands, part of the UK, and invades and takes them, is going to be a really interesting incident in this kind of story of the explosion.

Speaker 3 I think we should do the Falklands war another time because this is a really interesting thing. You mean the Balvinas Islands, Gordon? No, I mean the Falkland Islands, David.

Speaker 3 And I think you'll find it's a very touchy subject for us, Brits.

Speaker 1 I just consulted Argentine maps to get the to get the name, the name right, like the Gulf of America.

Speaker 3 But anyway, the reality is that basically there's a kind of complicated question about whether there was an intelligence or a policy failure in failing to spot the invasion.

Speaker 3 Particularly when you remember that we're supposed to be listening to their comms. And actually, when the war starts, the Dutch come up to the Brits.

Speaker 3 It's quite interesting and say, do you want some help with Argentine comms? Because we're in crypto-AG, because it turns out they're also now part of the kind of a sharing arrangement within Europe.

Speaker 3 So more states have kind of got access through the Germans to some of this intelligence. Really kind of interesting how much it's spread.

Speaker 3 And it's quite interesting because some people think, oh, the Dutch gave the Brits lots of information. I'm reliably informed that actually the Brits didn't need it.

Speaker 3 And they said, thank you very much, but they already knew what they were doing.

Speaker 3 And there's a very good account of this in John Ferris's book, The Authorized History of GCHQ Behind the Enigma, about the whole kind of Falklands war, which, as I said, we'll look at another time.

Speaker 3 But it's interesting because a former British minister, so someone who'd been a minister in the previous government, says there's been an intelligence failure over the Falklands.

Speaker 3 And he says, How come we didn't have advance warning of the invasion? Because we were reading their messages. And he actually says that in Parliament.
He uses it to attack the government.

Speaker 1 Oh, that's poor. That's poor form.

Speaker 3 It's a classic problem, politicians saying

Speaker 3 we could read someone's messages.

Speaker 3 And, you know, you can see Downing Street kind of goes, no, and actually thinks about prosecuting the guy because it's the Argentines, of course, now realize their messages are being read in the middle of the war.

Speaker 3 You can't change your equipment in the middle of the war, but they start changing the keys that are used to use it. But then, of course, they're wondering, isn't it Crypto AG which has done this?

Speaker 3 So Athena, the agent, the Swedish engineer, goes to Buenos Aires and he has to kind of smooth things over after the war and tell them that it's probably something else which has got cracked.

Speaker 3 Don't worry, it's not the crypto AG machines. And weirdly, the Argentines buy it.
They keep buying crypto AG equipment. So it's so interesting because there's all these kind of signs.

Speaker 3 And yet, I guess countries just don't want to believe the possibility that their communications are compromised. So they just keep going.

Speaker 1 The recruitment or the hiring of this Swedish advisor, you know, code name Athena. That's a great move, I think, on the part of the agency of the Germans.

Speaker 1 And actually, it surprises me that there wasn't someone on the kind of really technical side who was that in the know up until this point. I mean, is that actually I would say that?

Speaker 1 Is that true that up to this point, there wasn't someone with a really deep knowledge of the cryptology and the engineering who actually understood the CIA involvement?

Speaker 1 Because, I mean, that feels like as soon as you have that, you can send someone to Argentina and smooth this kind of situation over by, I mean, potentially just sort of talking in circles around the customers and lying to them.

Speaker 3 Yeah. Telling them it's something that you're selling them.

Speaker 1 Yeah.

Speaker 3 By this point, you can start to see the secret starting to leak out. There's another one in 1986, the Libyans bomber disco in Berlin, used by American troops, killing three people.

Speaker 3 And President Reagan, in the aftermath, he's going to launch an attack on the Libyans. And he's going to make clear that they're very confident that the Libyans did it.

Speaker 3 And of course, the reason is because they're using crypto-AG compromise to read read the Libyan traffic. And he kind of says it in a kind of way which makes people think, well, maybe that's the case.

Speaker 3 And the Iranians, interestingly enough, are going to listen to that and think, hang on a sec, we're using crypto AG as well. And then a big moment comes in 92.

Speaker 3 One of the company Crypto AG salesmen is going to be in Iran and he's going to get detained by the regime. And it's possibly they're detaining him as a bargaining chip on other things.

Speaker 3 And he doesn't know about the deal.

Speaker 3 But they're going to interrogate him and ask him about crypto ag being rigged so they clearly by now are suspicious after the libyans after everything that's happened going to become a big case and people in the cia and and and bnd d are freaking out about the fact this engineer has been detained it's called the hydra affair and there's lots of stuff going on he's not witting though no he's not witting it's so interesting because that's going to be part of the problem because in the end the germans are going to pay uh i think a million dollars to get him out a ransom they try and get the cia to pay up and they won't it looks like he gets out and then he's kind of angry and suspicious about something and he starts doing all these interviews in which he's telling people in the interviews that the Iranians kept on asking him and interrogating him about whether the company was rigging the equipment and was being used for espionage.

Speaker 3 And it kind of shows the dark side of this operation or the dangerous side for staff because an engineer or salesman like him is is actually part of an espionage operation traveling around the world to dangerous countries but unwitting, they don't know that they're actually working for a company owned by the CIA.

Speaker 3 And so these people are kind of being put at risk to some extent by not knowing that they're actually secretly, you know, engaged by the CIA. So it's interesting, the morality of that.

Speaker 3 But now the secret is starting to leak out. Journalists have been sniffing around the story.
Back in the 80s, the historian James Bamford is writing a book on the NSA.

Speaker 3 He comes across references to the Boris project in William Friedman's papers.

Speaker 3 And it's interesting because the NSA had tried to kind of scour Friedman's papers, basically to get hold of their letters, because they realize in their letters are all these references to understanding.

Speaker 3 But then in 1995, Scott Shane of the Baltimore Sun writes a story, and it's kind of partly because of the engineers and what's happened in Iran using testimony, which says this is rigged.

Speaker 3 You know, he's basically exposing the deal. And the company says, ah, pure invention.
It's nonsense.

Speaker 1 But actually, some countries stop buying it, but lots of other countries are still buying the kids still buying even though yeah still buying it it's crazy isn't it it gets back to the point uh that quote from friedman's autobiography right where he says it's kind of like a lot of this comes down to how the user uses the stuff and if you just stick your head in the sand we do this all the time with our phones right i mean it's just you understand

Speaker 1 that you have vulnerabilities and you take it for granted that if someone says it's a kid yeah exactly and or even you understand you have vulnerabilities and you're just sort of like, oh, I can't do anything about it.

Speaker 1 You know, I don't, I don't want to do the mental lift to actually make myself more secure. Cause I think that's absolutely right.
You have to confront the insecurity.

Speaker 3 Because confronting the insecurity might mean buying a new phone, or it might mean installing a new app, which looks really complicated and getting the settings right and checking what it is and being sure that's the right app.

Speaker 3 I'll just keep using the current one. I completely think that's right.
But then once you get to this point in the 90s, it's starting to unravel because the Germans want out.

Speaker 3 And it's interesting why they want out because I think they're worried about the risk to engineers because they've got a lot of German engineers there.

Speaker 3 They're worried about it being exposed because you're having all these stories.

Speaker 1 Also, every intelligence service in Western Europe seems to know about this, right? I mean, the French know about it. The Dutch know about it.
The Germans are doing this with the CIA.

Speaker 3 But here's the problem, of course, for the Germans.

Speaker 3 They also know that the Americans are using it to spy on people like the Spanish and the Italians, you know, on their neighbors, who they're supposed to be friends with in the EU, in the European Union.

Speaker 3 For the Germans, it's kind of awkward, isn't it? Because you're part of an intelligence operation with the Americans who you occasionally dismiss as those, you know, people over there.

Speaker 3 But you know that the Americans are using it to spy on the people you're now allied with in the European Union.

Speaker 3 And they're kind of worried this could get very messy for us diplomatically if it comes out. So they basically decide we want out.

Speaker 3 And it's interesting because the CIA basically buy them out, I think for $17.1 million.

Speaker 1 Almost a 4x return.

Speaker 3 There you go.

Speaker 3 yeah pretty good pretty good if you're the germans yeah not bad not bad the germans i mean they've been using it as a money-making operation anyway so there you go and of course later they'll discover that the the americans have been spying on them too snowden reveals that they're listening to angela merkel's cell phone and everything else so i think they maybe shouldn't have been surprised why are the germans so surprised why are they so surprised why are they so surprised when they know what the americans have been doing through crypto ag that they're being spied on i agree it just doesn't kind of make sense does it and you you did a story on this too gordon didn't you i did the long the illustrious list of journalists who uh have worked on crypto ag includes none other than gordon craft i did 2015 so many years later i did a story on it based on a whole load of um 52 000 declassified nsa documents that got revealed that year But it was funny.

Speaker 3 Just a brief note on this. What you found was like often they would declassify a ton of documents about, but it was often Friedman and Hagelin stuff.

Speaker 3 And they declassify different drafts of the same document. But obviously, a different redactor had looked at the different documents because in one, one sentence would be redacted.

Speaker 3 Another was a copy of the document in which another sentence had been redacted, but the first one was there. And so you could piece them together and basically work out the story.

Speaker 3 And the story I did back in 2015 was about kind of NSA and GCHQ spying on the world. And it basically revealed the deal between Hagelin and Friedman.

Speaker 3 But, but what I didn't know was was the secret that the company had been bought by the CIA. So there was no clue then that the CIA were in on it.
That was still very secret.

Speaker 3 What's really funny is I remember emailing the company and getting in contact with Crypto AG and asking them for comment at the time, which, you know, they gave me a kind of anodyne press statement or something like that.

Speaker 3 But it's kind of funny because I now know I was emailing a company which was still owned by the CIA at the time. You know, so could you tell me about this past? But

Speaker 3 by the time you get to this this point, CryptoAG as a company is in decline, partly because people aren't buying these machines anymore. You know, they're using phones and new devices.

Speaker 3 And so finally, in 2018, the CIA sells it off. It's interesting because they sell off the kind of the name and the company to some new owners who have no idea.

Speaker 3 You know, they have no idea what they bought and the history of what they bought.

Speaker 3 And it's only going to get, you know, become public in 2020 when, as you said, you know, Greg Miller at the Washington Post and German TV reveals the kind of CIA BND story.

Speaker 3 And the new owners of the company are like, what, what?

Speaker 3 We bought it from the CIA.

Speaker 1 It does raise some very interesting and I think at this point, unanswerable questions, which are fascinating to me around when the sale was happening, who was on the other side of the table?

Speaker 1 You know, I mean, it was it just a set of lawyers representing the ownership interest. Yeah, I'm guessing some Liechtenstein lawyer that maybe, maybe also had no idea that the CIA was involved.

Speaker 3 Yeah. So I guess at that point, you know, 2018, it's sold off.
2020

Speaker 3 news gets exposed. And at that point, the operation is finally over.

Speaker 3 But we're still kind of unraveling, I think, just how big it was and what the kind of consequences were of some of these operations and some of the knowledge that was gleaned from it.

Speaker 3 Because it's certainly, you're going for 60 years running comms for a large part of the world. It's wild, isn't it?

Speaker 1 I mean, it does, I guess, raise the question of of whether it would be possible to do something like that again. I mean, is there a modern parallel to this that could be happening right now?

Speaker 3 There are some parallels in what came out in the Snowden papers where you realize that they were fiddling with the encryption.

Speaker 3 So I think there's some interesting stuff in Snowden where there were a couple of programs that NSA and GCHQ were doing where it looks very similar in which different types of encryption was being sold for export versus for use at home, and where you could imagine the kind of very similar way, but now in the electronic world, that the complexity of the encryption, the how breakable it was, was being manipulated.

Speaker 3 And again, the kind of instructions might have been manipulated. So there are definitely parallels there, although the relationship between big tech companies and governments is different.

Speaker 3 This was a small company that the US could own, wasn't it? But if the US government goes to Apple or to Google or someone,

Speaker 3 those are bigger companies than governments, frankly.

Speaker 3 And you can see that, you know, the UK government gets into battles with Apple about encryption over some of the same worries about having unreadable messages.

Speaker 1 I guess an equivalent would be if a new, you know, let's say a company in Liechtenstein or in Switzerland or in some kind of semi-neutral feeling place, a software company had developed, you know, a secure messaging app like Signal.

Speaker 1 And if that app were to spread around the world and get downloaded on everybody's phones and everyone, you know, huge numbers of people start using it.

Speaker 1 And if at the core of that company, the founder and CEO were actually working for the CIA and had provided the CIA with the ability to have some leg up in how you actually would decrypt them to be, that would be sort of a modern, I think, equivalent to this, because it makes the point around the massive quantity

Speaker 1 of

Speaker 1 encrypted communications that the agency, the NSA, Western partners were able to decrypt because they had this in with Crypto AG. Like the quantity of this is so staggering.

Speaker 1 It's not like this was the key to the kingdom on Soviet plans and intentions during the Cold War, which would have been the absolute gold standard for human intelligence or any kind of signals intelligence.

Speaker 1 But it's providing a huge quantity of of really helpful information about a lot of, you know, tier two or tier three targets that are, I mean, still, you know, important to

Speaker 1 U.S. policymakers.
So it feels to me like an equivalent today would be an app that everyone's got on their phone. Well, the CIA actually has a way to read those messages if they want to.

Speaker 3 Well, the parallels come with the kind of questions about what tech you trust. Do you trust the kit that you're being sold?

Speaker 3 And it's why some governments have said they're nervous about Chinese technology. Do you buy Chinese telecoms technology? There was the big row around Huawei.

Speaker 3 The company always denied that it was providing backdoors to the Chinese state. There was never any evidence of that.

Speaker 3 But, you know, that was the accusation, which was, well, if countries around the world are buying Chinese kit, then what if there is a way where, by their understanding of it, they could get into it.

Speaker 3 Remember in the UK going to a place where they kind of pulled apart the Chinese kit to look for any kind of back doors and to check the code for any kind of backdoors, looking for the possibility possibility of what the fear was with Crypto AG, that there was some kind of secret way in.

Speaker 3 So you can still see there is this kind of issue of trust in technology.

Speaker 3 Now, they never found any there, but that was always the fear is that when you're buying your telecom's kit, your phone, the software for your phone, any of those things, you know, this is where it goes back to the Mossad Pager operation.

Speaker 3 Do you know who is behind a company? Can you trust the kit that you've got? Because most of us are not going to be able to kind of pull it apart and check the code and get into it.

Speaker 1 And there's a related point to that on the evergreen value of collaboration between a spy service and commercial entities, right?

Speaker 1 And that could be true for purposes of just cover, cover for a non-official cover officer or a NOC.

Speaker 1 Or like in this case, there's a fundamental piece to the Crypto HG story, which is If I'm the Libyans, if I'm the Saudis, from the Pakistanis, if I'm the Argentines, I'm not going going to buy encryption equipment from the United States.

Speaker 1 I'm not going to buy from an American company because I'm going to assume that that company is collaborating in some way, shape, or form with American intelligence, right?

Speaker 1 But from a Swiss company with a bunch of German and Swiss engineers, you know, like Switzerland, yeah. Right.
That's a different story.

Speaker 1 And to me, it shows the value in a spy service recruiting inside a commercial entity, entity, like in this story, the CIA recruiting someone in a third-party country that can sell into a hostile state.

Speaker 1 Like that, that's a really valuable intelligence target. And that was true in the 1950s with Crypto AG, and it's still true today.

Speaker 3 Well, thank you for listening. Just a reminder: you can join the Declassify Club where you'll get plenty of things like bonus episodes, interviews, a chance to kind of ask us questions.

Speaker 1 An entry into the nut file.

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The growing nut file for squirrels.

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Speaker 10 Hi there, it's David O'Dashoga from Journey Through Time, and here's that extract from our gunpowder plot series that I mentioned earlier.

Speaker 10 The person who's not rejoicing is Guy Fawkes in the tower. King James himself came to the tower to question Fawkes.

Speaker 10 That's quite an astonishing fact that Fawkes and the King looked into each other's eyes at that moment.

Speaker 6 And of course interrogations at this time, I mean we say interrogations as if they're just being questioned, but interrogations are brutal, violent

Speaker 3 events.

Speaker 10 Yeah, and it's going to get much, much more violent. Fawkes stands up to the king in a way that actually even impresses the king.
He's open that they plan to blow up parliament.

Speaker 10 He said that the aim had been to blow King James and the other Scots back to their Scottish mountains.

Speaker 3 He says that to the king.

Speaker 6 It takes guts, but it's also not the most diplomatic thing to say to the person you've just tried to murder who and your fate is in his hands. Yeah.

Speaker 3 Well, I think Fawkes knows what's going to happen.

Speaker 10 I mean, the king was impressed by his obstinacy, that he would not reveal the names of his co-conspirators, that he was willing to insult the king to his face.

Speaker 10 And you have to say about Guy Fawkes, a man who'd been a soldier for 10 years, my God, he had guts. I mean, he is a bad man.
He is a religious fanatic.

Speaker 10 He's not somebody I admire, but my God, he was brave. You know, you can be brave and wrong.

Speaker 10 You can be brave and involved in things that are evil at the same time. And he was all of those things.
But this willingness to stand up to the king,

Speaker 3 this is before the torture.

Speaker 6 If you want to hear more about gunpowder, treason, and plot, listen to Journey Through Time, wherever you get your podcasts.