Crypto AG was a Swiss company specialising in communications and information security founded by Boris Hagelin in 1952. The company was secretly purchased for US $5.75 million and jointly owned by the American Central Intelligence Agency (CIA) and West German Federal Intelligence Service (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 machines and a wide variety of cipher devices.
The company had about 230 employees, had offices in Abidjan, Abu Dhabi, Buenos Aires, Kuala Lumpur, Muscat, Selsdon 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.
The company has been criticised for selling backdoored products to benefit the American, British and German national signals intelligence agencies, the National Security Agency (NSA), the Government Communications Headquarters (GCHQ), and the BND, respectively. Crypto AG sold equipment to more than 120 countries, including India, Pakistan, Iran, and multiple Latin American nations although neither the Soviet Union nor People's Republic of China were customers of Crypto AG, several of their friendly countries had the company's equipment. On 11 February 2020, The Washington Post, ZDF 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 the BND called it "Rubicon" () and the CIA called it "Minerva". 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. Originally called AB Cryptoteknik and founded by Arvid Gerhard Damm in Stockholm 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, Cryptoteknik came under the control of Hagelin, an early investor.
Hagelin's hope was to sell the device to the United States Army. 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, and the code-breakers in Arlington Hall. 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, Hagelin became close friends with William F. Friedman, who in 1952 became chief cryptologist for the National Security Agency (NSA) and whom Hagelin had known since the 1930s. The same year, Hagelin's lawyer, Stuart Hedden, became deputy commander in CIA, 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 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.