The CIA secretly bought a company that sold encryption devices across the world. Then its spies sat back and listened.

The company, Crypto AG, got its first break with a contract to build code-making machines for U.S. troops during World War II. But what none of its customers ever knew was that Crypto AG was secretly owned by the CIA in a highly classified partnership with West German intelligence. “Foreign governments were paying good money to the U.S. and West Germany for the privilege of having their most secret communications read by at least two (and possibly as many as five or six) foreign countries.” From 1970 on, the CIA and its code-breaking sibling, the National Security Agency, controlled nearly every aspect of Crypto’s operations — presiding with their German partners over hiring decisions, designing its technology, sabotaging its algorithms and directing its sales targets. And the 1992 arrest of a Crypto salesman in Iran, who did not realize he was selling rigged equipment, triggered a devastating “storm of publicity,” according to the CIA history. But the CIA bought the Germans’ stake and simply kept going, wringing Crypto for all its espionage worth until 2018, when the agency sold off the company’s assets, according to current and former officials. This story is based on the CIA history and a parallel BND account, also obtained by The Post and ZDF, interviews with current and former Western intelligence officials as well as Crypto employees. CyOne has more substantial links to the now-dissolved Crypto, including that the the new company’s chief executive held the same position at Crypto for nearly two decades of CIA ownership. A CyOne spokesman declined to address any aspect of Crypto AG’s history, but said the new firm has “no ties to any foreign intelligence services.” Andreas Linde, the chairman of the company that now holds the rights to Crypto’s international products and business, said he had no knowledge of the company’s relationship to the CIA and BND before being confronted with the facts in this story. “We at Crypto International have never had any relationship with the CIA or BND — and please quote me,” he said in an interview. “If what you are saying is true, then absolutely I feel betrayed, and my family feels betrayed, and I feel there will be a lot of employees who will feel betrayed as well as customers.” The Swiss government announced on Tuesday that it was launching an investigation of Crypto AG’s ties to the CIA and BND. The CIA and BND documents indicate that Swiss officials must have known for decades about Crypto’s ties to the U.S. and German spy services, but intervened only after learning that news organizations were about to expose the arrangement. (Jahi Chikwendiu/The Washington Post) In recent interviews, deceived employees — even ones who came to suspect during their time at Crypto that the company was cooperating with Western intelligence — said the revelations in the documents have deepened a sense of betrayal, of themselves and customers. “It was a very valuable source of communications on significantly large parts of the world important to U.S. policymakers.” Boris Hagelin, the founder of Crypto, and his wife arrive in New York in 1949. (Stanislav Dobak/The Washington Post) Alarmed by the capabilities of the new CX-52 and other devices Crypto envisioned, U.S. officials began to discuss what they called the “Hagelin problem.” These were “the Dark Ages of American cryptology, ” according to the CIA history. In so doing, the U.S.-Hagelin partnership had evolved from denial to “active measures.” No longer was Crypto merely restricting sales of its best equipment, but actively selling devices that were engineered to betray their buyers. U.S. intelligence officials discussed the idea of buying Crypto for years, but squabbling between the CIA and NSA prevented them from acting until two other spy agencies entered the fray. In a meeting in early 1969 at the West German Embassy in Washington, the head of that country’s cipher service, Wilhelm Goeing, outlined the proposal and asked whether the Americans “were interested in becoming partners too.” Months later, CIA Director Richard Helms approved the idea of buying Crypto and dispatched a subordinate to Bonn, the West German capital, to negotiate terms with one major caveat: the French, CIA officials told Goeing, would have to be “shut out.” West Germany acquiesced to this American power play, and a deal between the two spy agencies was recorded in a June 1970 memo carrying the shaky signature of a CIA case officer in Munich who was in the early stages of Parkinson’s disease and the illegible scrawl of his BND counterpart. “It was through this mechanism,” the CIA history notes, “that BND and CIA controlled the activities” of Crypto. Crypto was called “Minerva,” which is also the title of the CIA history. The operation was at first code-named “Thesaurus,” though in the 1980s it was changed to “Rubicon.” Each year, the CIA and BND split any profits Crypto had made, according to the German history, which says the BND handled the accounting and delivered the cash owed to the CIA in an underground parking garage. To CIA operatives, the BND often seemed preoccupied with turning a profit, and the Americans “constantly reminded the Germans that this was an intelligence operation, not a money-making enterprise.” The Germans were taken aback by the Americans’ willingness to spy on all but its closest allies, with targets including NATO members Spain, Greece, Turkey and Italy. Crypto sent an executive to Riyadh, Saudi Arabia, with 10 Rolex watches in his luggage, the BND history says, and later arranged a training program for the Saudis in Switzerland where the participants’ “favorite pastime was to visit the brothels, which the company also financed.” At times, the incentives led to sales to countries ill-equipped to use the complicated systems. In 1982, the Reagan administration took advantage of Argentina’s reliance on Crypto equipment, funneling intelligence to Britain during the two countries’ brief war over the Falkland Islands, according to the CIA history, which doesn’t provide any detail on what kind of information was passed to London. The files don’t include a comprehensive list but identify at least62 customers.THE AMERICASEUROPEAFRICAArgentinaAustriaAlgeriaBrazilAngolaCzechoslovakiaEgyptChileGreeceGabonColombiaHungaryGhanaHondurasIrelandGuineaMexicoItalyIvory CoastNicaraguaPortugalLibyaPeruRomaniaMauritiusUruguaySpainMoroccoVenezuelaTurkeyNigeriaVatican CityRep. of the CongoYugoslaviaSouth AfricaSudanTanzaniaTunisiaZaireZimbabweWORLDWIDEORGANIZATIONMIDDLE EASTREST OF ASIAIranBangladeshUnited NationsIraqBurmaIndiaJordanIndonesiaKuwaitJapanLebanonMalaysiaOmanPakistanQatarPhilippinesSaudi ArabiaSouth KoreaSyriaThailandU.A.EVietnamThe records show that at least four countries — Israel, Sweden, Switzerland and the United Kingdom — were aware of the operation or were provided intelligence from it by the United States or West Germany.CryptoAGUnited StatesWest GermanyWEST GERMANYU.S.1980 bordersDocuments indicate that more than 120 countries used Crypto AG encryption equipment from the 1950s well into the 2000s. The files don’t include a comprehensive list but identify at least62 customers.THE AMERICASEUROPEAFRICAArgentinaAustriaAlgeriaBrazilAngolaCzechoslovakiaChileEgyptGreeceColombiaGabonHungaryHondurasGhanaIrelandGuineaMexicoItalyIvory CoastNicaraguaPortugalLibyaPeruRomaniaUruguayMauritiusSpainMoroccoVenezuelaTurkeyNigeriaVatican CityRep. of the CongoYugoslaviaSouth AfricaSudanTanzaniaTunisiaZaireZimbabweWORLDWIDEORGANIZATIONMIDDLE EASTREST OF ASIAIranBangladeshUnited NationsIraqBurmaIndiaJordanIndonesiaKuwaitJapanLebanonMalaysiaOmanPakistanQatarPhilippinesSaudi ArabiaSouth KoreaSyriaThailandU.A.EVietnamThe records show that at least four countries — Israel, Sweden, Switzerland and the United Kingdom — were aware of the operation or were provided intelligence from it by the United States or West Germany.CryptoAGUnited StatesWest GermanyWEST GERMANYUNITEDSTATES1980 bordersDocuments indicate that more than 120 countries used Crypto AG encryption equipment from the 1950s well into the 2000s. The files don’t include a comprehensive list but identify at least62 customers.THE AMERICASEUROPEAFRICAMIDDLE EASTREST OF ASIAArgentinaAustriaAlgeriaIranBangladeshBrazilAngolaIraqBurmaCzechoslovakiaIndiaChileJordanEgyptGreeceIndonesiaColombiaKuwaitGabonHungaryJapanHondurasLebanonGhanaIrelandMalaysiaOmanMexicoGuineaItalyPakistanQatarNicaraguaIvory CoastPortugalPhilippinesSaudi ArabiaPeruLibyaRomaniaSouth KoreaSyriaUruguayMauritiusSpainThailandU.A.EVenezuelaMoroccoTurkeyVietnamNigeriaVatican CityRep. of the CongoYugoslaviaSouth AfricaSudanTanzaniaTunisiaWORLDWIDEORGANIZATIONZaireZimbabweUnited NationsThe records show that at least four countries — Israel, Sweden, Switzerland and the United Kingdom — were aware of the operation or were provided intelligence from it by the United States or West Germany.CryptoAGUnited StatesWest GermanyWEST GERMANYUNITEDSTATES1980 bordersDocuments indicate that more than 120 countries used Crypto AG encryption equipment from the 1950s well into the 2000s. Because these and other developments were so hard to defend, Wagner at one point told a select group of members of the research and development unit that Crypto “was not entirely free to do what it wanted.” The acknowledgment seemed to subdue the engineers, who interpreted it as confirmation that the company’s technology faced constraints imposed by the German government. When Widman replied that he did, Burmeister said, “Now, do you understand who really owns Crypto AG?” At that point, Widman was introduced to Richard Schroeder, a CIA officer stationed in Munich to manage the agency’s involvement in Crypto. Widman told them the NSA had probably cracked an outdated speech-scrambling device that Argentina was using, but that the main product they bought from Crypto, the CAG 500, remained “unbreakable.” “The bluff worked,” the CIA history says. Years after his recruitment, he told U.S. officials that he saw himself as “engaged in a critical struggle for the benefit of Western intelligence,” according to the CIA document. Iran’s communications were “80 to 90 percent readable” to U.S. spies, according to the CIA document, a figure that would likely have plunged into the single digits had Tehran not used Crypto’s compromised devices. In the German history, Wolbert Smidt, the former director of the BND, complained that the United States “wanted to deal with the allies just like they dealt with the countries of the Third World.” Another BND official echoed that comment, saying that to Americans “in the world of intelligence there were no friends.” The Cold War had ended, the Berlin Wall was down, and the reunified Germany had different sensitivities and priorities. By the mid-1990s, “the days of profit were long past,” and Crypto “would have gone out of business but for infusions from the U.S. government.” As a result, the CIA appears to have spent years propping up an operation that was more viable as an intelligence platform than a business enterprise. In the end, this is not the way.” Most of the executives directly involved in the operation were motivated by ideological purpose and declined any payment beyond their Crypto salaries, according to the documents. After the BND’s departure, the CIA expanded its clandestine collection of companies in the encryption sector, according to former Western intelligence officials. But the BND history notes that one of Crypto’s longtime rivals — Gretag AG, also based in Switzerland — was “taken over by an ‘American’ and, after a change of names in 2004, was liquidated.” Crypto itself hobbled along. U.S. intelligence agencies appear to have been content to let the Crypto operation play out, even as the NSA’s attention shifted to finding ways to exploit the global reach of Google, Microsoft, Verizon and other U.S. tech powers. “Neither CyOne Security AG nor Mr. Otth have any comments regarding Crypto AG’s history,” the company said in a statement. When confronted with evidence that Crypto had been owned by the CIA and BND, Linde looked visibly shaken, and said that during negotiations he never learned the identities of the company’s shareholders. When asked why he failed to confront Otth and others involved in the transaction about whether there was any truth to the long-standing Crypto allegations, Linde said that he had regarded these as “just rumors.” He said that he took assurance from the fact that Crypto continued to have substantial contracts with foreign governments, countries he assumed had tested the company’s products vigorously and would have abandoned them if they were compromised. Given the information now coming to light, he said, this “was probably one of the most stupid decisions I’ve ever made in my career.” The company’s liquidation was handled by the same Liechtenstein law firm that provided cover for Hagelin’s sale to the CIA and BND 48 years earlier.