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David McCloskey
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Gordon Carrera
David. David, I've got some top secret information to share with you today.
David McCloskey
Oh Gordon, what have you done this time?
Gordon Carrera
Don't worry, don't worry, it's good news. 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 31 January 2026 at the South Bank Centre in London. Luckily, the date and location aren't secret.
David McCloskey
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.
Gordon Carrera
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. 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.
David McCloskey
That's right, the wonderful world of intelligence failures. Nothing more wonderful than an intelligence failure. And if 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. But, Gordon, when can our fantastic listeners and our Secret Squirrels get tickets for this exciting event?
Gordon Carrera
Well, members of the Declassified Club, the famed Secret Squirrels, can get members only presale tickets live from tomorrow, Thursday, 6th of November, and at 10am GMT, while the general sale for everyone else will be from Friday 7th November at 12pm GMT. Now, the links for the general sale tickets will be in the description for this episode and the rest is classified dot com. 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.
David McCloskey
And with that, back to the nutty story of crypto ag. Hello. Welcome to the rest of classified. I'm David McCloskey.
Gordon Carrera
And I'm Gordon Carrera.
David McCloskey
And the question, Gordon, is 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?
Gordon Carrera
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.
David McCloskey
Oh, you've set it up in a very conspiratorial way, Gordon. As 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 insane sort of intelligence story around Crypto ag, a Swiss cryptology company that when we left you last in the process of sort of being absorbed by the Central Intelligence Agency, and we looked last time at this really, I think, remarkable friendship between Boris Hagelin, the founder and CEO of Crypto ag, and, and William Friedman, this sort of cryptology and signals intelligence pioneer in the US who worked for the nsa. And this friendship at the heart of this, what becomes a partnership that allowed the US 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. He's thinking it's time to step down. He's getting close to 70. And the NSA, where Friedman had worked and been more or less running this operation up to this point is, is kind of uncomfortable maybe with the human touch that's required. And the Central Intelligence Agency has, you wrote, muscled in, but I like to say, starting to sweep this company right off its feet.
Gordon Carrera
Every stereotype about NSA and CIA people could come in into this episode. So we've had this amazing operation where the NSA has been able to work, you know, thanks to this friendship, to, to basically rig the sale of all of these machines around the world. But the crucial question is Boris Haglin wants to retire. So it becomes a question of succession. And this has got echoes of the TV series and some of those questions, because Boris Haglin has got a son, Bo Jr. Good name. And he's definitely viewed as the successor. He's been groomed as such. He's a capable inventor himself. 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. And you can sense from that there's some strains between them. Beau doesn't know what his father has been doing. The gentleman's agreement with William Friedemann, that's grown into a more kind of formal arrangement. The father has certainly kept it from the son, which I think is interesting.
David McCloskey
The more we talk about the story, the more sort of flummoxed I am by Hagelin 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. He's potentially handing this off to his son. But Hagelin Sr has put so much at risk in this operation, but his entire business is, is potentially.
Gordon Carrera
It's kind of built on a lie.
David McCloskey
Yeah, it's built on a lie. He must have been so ideologically committed, I think, to this and probably got some secret thrills out of it that he was willing to continue with. And just it's immense risk.
Gordon Carrera
And Bo Jr 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. Beau Jr. 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. 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. It's the kind of, it feels like one of those classic generational succession stories. 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. 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, he's enjoying himself too much. So yeah, it's, it's Logan, Roy and the family and the drama succession, isn't it?
David McCloskey
And Beau is actually a pretty good salesman. And because he doesn't, 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.
Gordon Carrera
I mean, well, you can't blame him because he's thinking like, hey, kind of goes to the Brazilians and thinking new market and he starts selling in 1960 like the top machines. 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 CX52. And so the US kind of freaks out because they're like, well, we won't be able to read Brazilian messages anymore. So then Boris has to kind of get involved and convince the Brazilians to instead buy a model that can be read. So the issue is he's due to take over, but can he be trusted? Not everyone is sure. US intelligence describe him as a wild card and wonder if the deal's going to survive the succession. 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? So, 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. But the reality is he's thinking about selling it to the CIA. Not openly, but through a series of front companies. And only, only three people are aware of the plans to sell the company. Boris the CEO and Beau Jr. But Beau Jr doesn't know that it's.
David McCloskey
The CIA because we should say by this point, Boris Sr. Is not the CEO.
Gordon Carrera
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 a sale. So there's a kind of problem. And then 1970, the problem to some extent goes away because Beau, Beau Jr. Dies in a car crash on the Washington Beltway just outside of DC.
David McCloskey
Now, okay, you've said this in very, you know, sort of dark tones here, Gordon.
Gordon Carrera
Officially there is no sign of it.
David McCloskey
The beltway is very dangerous. 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?
Gordon Carrera
I tried to find out, like tell me more about the crash, who else was in. You can't find any details about it.
David McCloskey
What would be an appropriate set of details to have on a random car crash in 1970? I don't how deep down in the.
Gordon Carrera
Rabbit hole of a young business. I'm not trying to revisit my JFK assassination theories about the CIA having done it.
David McCloskey
That's good number.
Gordon Carrera
But, but it is incredibly convenient that Bo Jr.
David McCloskey
Dies now.
Gordon Carrera
Look, I mean, look, some in European intelligence are going to wonder if something happened. Boris himself is going to wonder what happened with his son. He's going to hire private detectives to try and find out if there's something more to it. I, 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.
David McCloskey
Okay, we should say, I mean you've covered this in sort of a gloss of paranoid conspiracy, Gordon.
Gordon Carrera
It's the 70s.
David McCloskey
We're in the 70s now. Yeah, we're in the 70s. There's absolutely no evidence of foul play here. Right?
Gordon Carrera
There's not evidence of it.
David McCloskey
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.
Gordon Carrera
So it's so interesting, this bit which is how does the CIA and we flagged also the Germans come to buy it? 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 Hagelin machines and they're kind of focused on computing power and the CIA is kind of very interested in this. And I guess it's fair to say, isn't it? The CIA has always had a little bit of, a little bit of game in the kind of communications intelligence, signals intelligence world, hasn't it? It's not that it always leaves it to the nsa.
David McCloskey
Well, yeah, I mean, I asked a couple examples. One that comes immediately to mind is the Berlin Tunnel operation run by a friend of the pod, Bill Harvey, later.
Gordon Carrera
Involved in the JFK assassination, allegedly alleged.
David McCloskey
By Gordon Carrera and other, sorry, conspiracy theorists. Yes, I've added that to your nut file, Gordon. So that bullet point has been added.
Gordon Carrera
But yeah. So the Berlin tunnel was CIA digging a tunnel into the Soviet sector of Berlin, wasn't it? To literally tap the communications.
David McCloskey
It also reminds me of an operation Gordon we mentioned briefly in our series on Adolf Tolkachev, the, the so called billion dollar spy, the, the code name for this one, I believe it was GT taw. And it was an effort by the CIA to essentially they would send someone down into a, like a, a manhole outside of, of Moscow and place a collar on a communications line that the Soviet, I think the Soviet Ministry of Defense used. 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. It's a, it's a CIA officer who's responsible for maintaining that caller and all of the tapes associated with it. 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 this stuff is physically collected. 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, by the CIA. Right. And it's a natural fit. So there's more of a, a partnership, I think, between the CIA and the NSA on signals intelligence than is often well understood.
Gordon Carrera
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. You need a person to do that. 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. 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 This is really interesting because it seems like some Western European services knew or had worked out what was going on with hagelin. 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. 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. It's basically, I think it's fair to say the CIA are like, yeah, yeah, yeah, it's a good idea buying it, but I think we're the ones to do that because I think it's fair to say that CIA and the French did not entirely trust each other at the this point.
David McCloskey
That's shocking.
Gordon Carrera
The relationship with the Germans, though, between the BND and the CIA isn't. Is much closer though, isn't it? When you look back on it, it's interesting, isn't it? Because the bnd, obviously, after Second World War, Germany needs a new intelligence service. 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. 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. And then there was other reasons why I thought it was interesting why the CIA would be happy working with the Germans. 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. And it's a lot easier if you've got the Germans on board. And you can send some engineers from Siemens, the company, it's a kind of German company which German intelligence can have a relationship with. You can send them over and to kind of deal with it. 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. You know, you can see why there's a kind of benefit to keeping it covert if you use the Germans as a partner.
David McCloskey
If you think of 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. 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.
Gordon Carrera
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. So there's a bit of knowledge around and it's interesting, they do keep it quiet. 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 in Liechtenstein. So it's not like, you know, the CIA kind of on companies records it says, you know, bought by CIA. Vnd this is part of the reason.
David McCloskey
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. 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.
Gordon Carrera
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. I mean they think it's some business kind of group, I guess one of these shell companies. So only Boris Hagelin and the CEO know about it. All the profits go through Liechtenstein and then come to Munich. And well, I love this fact. 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. I mean you just imagine literally bags of cash being handed over in an underground car park. I mean it's crazy.
David McCloskey
You would think, you know, two services running a joint operation. There is going to be tension and misunderstanding and you know, differences of perspective. But I was amused to see that the CIA thought the, the BND was primarily using this as a money making operation for the service.
Gordon Carrera
Yeah, the tension grows because the CIA think well the Germans just seem to be more worried about the money than the, the spying. 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. And I Just love. And of course, you know, you're the Germans, you're like, there are European partners.
David McCloskey
Long tradition of Germans being shocked by spying on allies, which I think is total garbage. Personally, they are very good at play acting the shocked. The shocked partner. Oh, my goodness, you Americans were high.
Gordon Carrera
On the, on the Greeks gambling in this casino. Yeah. So through the, 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. 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 for Camp David are monitored because they're using crypto AG machines. 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. NSA is reading about 85% of Iranian comms, although it's interesting because they're still taken by surprise.
David McCloskey
And Bobby Inman, who is head of the NSA at this time, I mean, has, 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, through providing the transcripts of, you know, these diplomatic communications and sort of the back and forth between Sadat, who's negotiating, and then, you know, 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. So Inman basically said it was absolutely critical intelligence to have and so valuable. I also found a great story from this period. Gordon, 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?
Gordon Carrera
Never had Billy Beer.
David McCloskey
I haven't either. 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 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. And Inman, who is the NSA director at the time, sees this intercept and is like, oh, crap, you know, like, what, what do I do? And goes to the Justice Department and 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. But that whole chain of events is because the Libyans are using crypto ag machines.
Gordon Carrera
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. 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. 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 US Government knew exactly what these militaries were doing in terms of repressing their own people? So Salvo Allende gets overthrown by the Chilean military led by General Pinochet, with CIA help, it's worth saying, and thousands are killed. Then you get the same in Argentina, you know, where Junta takes over in 77, people are getting thrown out of airplanes, dissidents disappeared, all these things. And it does raise the question, well, does that mean the US knew all about what these militaries were doing against their own people because they were inside their comms because of crypto ag?
David McCloskey
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, let's take a break, and we come back, we'll see how the CIA, hopefully Gordon, manages to hold this entire thing together.
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David McCloskey
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Gordon Carrera
Prices and participation may vary. Prices may be higher in Hawaii, Alaska and California. And for delivery.
David McCloskey
Well, welcome back, Gordon. We left on the cliffhanger that Argentina was gonna almost screw this entire thing up. 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.
Gordon Carrera
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 unravelling of this operation. Crypto AG, big company, successful company, 250 people. But of course, some of the engineers inside the company getting a little bit suspicious about things that they don't know. 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. And one of the reason is the staff are frankly doing their job. Like, the engineers are seeing a problem, a vulnerability, and they're fixing it. And interesting things start to happen. They're reading the Syrian codes, And then in 1977, the NSA complains suddenly they can't read them anymore. And the reason is that one engineer from the company 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. And, you know, the CIA is actually a bit annoyed about this because they think maybe it'd been better to keep him on the payroll, to keep him quiet. And you get other engineers who are kind of aware of something secret. They're going to start drinking, 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. 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. 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 this. 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. 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. They think 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. 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, and that's going to be the kind of one of the next stages.
David McCloskey
Do we know, Gordon, how the CIA and the BND were interacting with the CEO at the time and like with, with the. The winning members of the company? I mean, what was the actual dance like? 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 Boris Sr. 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?
Gordon Carrera
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. But the problem is you have got people who are kind of coming out of meetings looking a bit mysterious. And one of the interesting things is that the CIA and BND realize they actually are going to need someone inside the company to kind of manage the engineering side because it's just too difficult. Too many people are finding out about it. So in 1980 they actually get a company to hire a maths professor from Stockholm who's going to be given a CIA codename Athena, because that's 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 and. 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.
David McCloskey
I was pleased to see a code name appear in here, Gordon, because I think so far you have downplayed the codename game inside this operation, because in the cable traffic Crypto AG is referred to as Minerva. Right? That's the. That's the codename. 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 very boring and bookish, and Rubicon is much more exciting.
Gordon Carrera
I'm going to guess NSA came up with thesaurus and CIA came up with Rubicon, but I don't know. Again, sorry, nsap.
David McCloskey
That's a good guess. I think it's a good guess.
Gordon Carrera
Interesting enough, The Falklands War, 1982, when Argentina takes the Falkland Islands, part the UK and invades and takes them, is going to be a really interesting incident in this kind of story of the explosion. I think we should do the Falklands War another time because it's a really interesting.
David McCloskey
You mean the Belvinas Islands, Gordon?
Gordon Carrera
No, I mean the Falkland Islands, David. And I think you'll find it's a very touchy subject with us Brits.
David McCloskey
I just consulted Argentine maps to get the. To get the name.
Gordon Carrera
The name right, like the Gulf of America. But anyway, the reality is that basically there's a kind of complicated question about whether there was an intelligence or a policy failure and failing to spot the invasion. And 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, 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. So more states have kind of got access through the Germans to some of this intelligence. Really kind of interesting how much it's. It spread. 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. And they said, thank you very much, but they already knew what they were doing. And there's a very good account of this in John Ferris book, the Authorised History of GCHQ behind the Enigma, about the whole kind of Falklands War, which, as I said, we'll look at another time. 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. 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.
David McCloskey
Oh, that's poor. That's poor form.
Gordon Carrera
It's a classic problem, politicians saying we could read someone's messages. 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. 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? 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. 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, and yet, I guess countries just don't want to believe the possibility that their communications are compromised. So they just keep going.
David McCloskey
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. 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, does that actually say that? Is that.
Gordon Carrera
Is that true?
David McCloskey
That up to this point there wasn't someone with a really deep knowledge of the. The cryptology and the engineering who actually understood the CIA involvement. 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.
Gordon Carrera
Yeah. About that.
David McCloskey
You're selling them. Yeah.
Gordon Carrera
By this point, you can start to see the secret starting to leak out. There's Another one in 1986, the Libyan bomber disco in Berlin used by American troops, killing three people. 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. And of course, the reason is because they're using Crypto AG compromise to 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. 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 92,1 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. And he doesn't know about the deal, 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 BND 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.
David McCloskey
He's not witting, though.
Gordon Carrera
No, he's not witting. And it's so interesting because that's going to be part of the problem because in the end, the Germans are going to pay, 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 about whether the company was rigging the equipment and was being used for espionage. 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 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. 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. 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. He comes across references to the Boris project in William Friedman's papers. 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 all these references to understanding. 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. You know, he's basically exposing the deal. And the company says, ah, pure invention. It's nonsense. But actually some countries stop buying it, but lots of other countries are still buying the kit.
David McCloskey
Still buying that. Yeah, still buying it.
Gordon Carrera
It's crazy, isn't it?
David McCloskey
It gets back to the point, 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 that you have vulnerabilities and you take it.
Gordon Carrera
For granted that if someone says it's a good.
David McCloskey
Yeah, exactly. And. Or even you understand you have vulnerabilities and you're just sort of like, I can't do anything about it. You know, I don't want to do the mental lift to actually make myself more secure, because I think that's absolutely. I have to confront the insecurity.
Gordon Carrera
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. Ah, 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. 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. They're worried about it being exposed because you're having all these stories.
David McCloskey
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.
Gordon Carrera
But here's the problem, of course, for the Germans, 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, 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, but you know that the Americans are using it to spy on the people you're now allied with in the European Union. 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. And it's interesting because the CIA basically buy them out, I think, for $17.1.
David McCloskey
Million, almost a 4x return. There you go.
Gordon Carrera
Yeah, pretty good. Pretty good if you're the Germans.
David McCloskey
Yeah, not bad. Not bad, the Germans. I mean, they've been using it as a money making operation anyway. So there you go.
Gordon Carrera
And of course, later they'll discover that 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.
David McCloskey
Why are the Germans so surprised? Why are they so surprised?
Gordon Carrera
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?
David McCloskey
And you did a story on this too, Gordon, didn't you?
Gordon Carrera
I did.
David McCloskey
The illustrious list of journalists who have worked on crypto ag includes none other than Gordon Carrera.
Gordon Carrera
I did 2015. So many years later I did a story on it based on a whole load of 52,000 declassified classified NSA documents that got revealed that year. But it was funny. Just a brief note on this. What you found was like, often they would declassify a ton of documents about. It was often Friedman and Hagel and stuff. And they declassified different drafts of the same document. But obviously a different redactor had looked at the different documents because in one, one sentence would be redact. 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. 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 Haglin and Friedman. But what I didn't know 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. 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. 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, could you tell me about this past. But by the time you get to this point, Crypto AG as a company is in decline, partly because people aren't buying these machines anymore. You know, they're using phones and new devices. 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, you know, they have no idea what they bought and the history of what they bought. 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 and the new owners of the company are like, what? What? We bought it from the CIA?
David McCloskey
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? You know, I mean, it. Was it just a set of lawyers representing the ownership interest?
Gordon Carrera
Yeah, I'm guessing some Lichtenstein lawyer that.
David McCloskey
Maybe, maybe also had no idea that the CIA was involved.
Gordon Carrera
Yeah. So I guess at that point, you know, 2018, it sold off. 2020 news gets exposed, and at that point, the operation is finally over, 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. 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?
David McCloskey
I mean, it does, I guess, raise the question 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?
Gordon Carrera
There are some parallels in what came out in the Snowden papers where you realize that they were fiddling with the encryption. 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 and again the kind of instructions might be manipulated. So there are definitely parallels there. Although the relationship between big tech companies and governments is different. 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, it's. Those are bigger companies than governments, frankly. 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.
David McCloskey
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. 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. 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 of encrypted communications that the agency, the nsa, Western partners were able to decrypt because they had this, this in with crypto ag like the quantity of this is so staggering. 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. But it's providing a huge quantity of really helpful information about a lot of, you know, Tier 2 or Tier 3 targets that I mean, still, you know, important to us, US 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 and they want to.
Gordon Carrera
Well, the parallels come with the kind of questions about what, what tech you trust? Do you trust the kit that you're being sold? And it's why some governments have said they're nervous about Chinese technology. Do you buy Chinese telecoms technology? It was the big row around Huawei. The company always denied that it was providing back towards the Chinese state. There was never any evidence of that, that, but you know, that was the accusation which was, well, if countries around the world are buying Chinese kit, and what if there is a way where by their understanding of it, they could get into it. 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 of what the fear was with Crypto Ag that there was some kind of secret way in. So you can still see there is this kind of issue of trust in technology. Now they never found any there, but that was always the fear is that when you're buying your telecoms 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. 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.
David McCloskey
And there's a related point to that on the evergreen value of collaboration between a spy service and commercial entities. Right. And that could, that could be true for purposes of just cover cover for a non official cover officer, a NOC or like in this case, there's a fundamental piece to the Crypto AG 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 to buy encryption equipment, equipment from the United States, I'm not going to buy from an American company because I'm going to, I'm going to assume that that company is collaborating in some way, shape or form with American intelligence. Right, but from a Swiss company with a bunch of German and Swiss engineers, you know, like Switzerland. Yeah, right. That's a different story. And to me it shows the, the value in a spy service recruiting inside a commercial entity like in this story, the CIA recruiting someone in a third party country that can sell into a hostile state 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.
Gordon Carrera
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, chance to kind of ask us questions, an entry.
David McCloskey
Into the Nut file, entry into the Nut file, the Secret Squirrel nut file.
Gordon Carrera
The growing nut file for Squirrels nut.
David McCloskey
File maintained by your intrepid co hosts here. We do hope you join and send.
Gordon Carrera
Us a message over whatever encrypted platform you trust. But otherwise we'll see you next time.
David McCloskey
We'll See you next time.
David Ulischogger
Hi there. It's David or the Shogga from Journey Through Time. And here's that extract from our Gunpowder Plot series that I mentioned earlier. The person who's not rejoicing is Guy Fawkes in the Tower. King James himself came to the Tower to question Fawkes. That's quite an astonishing fact that Fawkes and the King looked into each other's eyes at that moment.
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And of course, interrogations at this time. I mean, we say interrogations as if they're just being questioned, but interrogations are brutal, violent events.
David Ulischogger
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. He said that the aim had been to blow King James and the other Scots back to their Scottish mountains. He says that to the King.
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It takes guts, but it's also not the most diplomatic thing to say to the person you've just tried to murder and your fate is in his hands.
David Ulischogger
Yeah, well, I think Fawkes knows what's going to happen. 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. 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. He's not somebody I admire, but my God, he was brave. You know, you can be brave and wrong. 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, this is before the torture.
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If you want to hear more about gunpowder, treason and plot, listen to Journey Through Time. Wherever you get your podcasts.
David McCloskey
You know the words that dominate our news cycle.
Gordon Carrera
Private equity keeps investing capital gains tax.
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On.
David McCloskey
Fed rate cuts. But do you truly understand how they impact your world and your wallet? In a world that skims the what, understand the why. Because context changes everything. Subscribe to learn more at Bloomberg, the global benchmark for business news.
David Ulischogger
Hello, I'm David Ulischogger.
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And I'm Sarah Churchwell.
David Ulischogger
This week on Journey Through Time, we are exploring the story of the gunpowder plot of 1605. The story of how a small group of Catholics engaged in what would have been the most devastating terrorist attack in all of British history.
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The plan was ruthless blow up Parliament, kill James I and most of his family all in a single blow.
David Ulischogger
The series will tell the story of treason and traitors of a group of men led by the charismatic Robert Catesby, who believed that the only option left to them to win their rights as Catholics was the violent destruction of the Stuart state.
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We look at the story of Guy Fawkes, the nation's most famous traitor, from his recruitment to becoming the plot's fall guy and ultimately being tortured and killed.
David Ulischogger
Finally, we find out why this plot is still remembered now, 400 years later. Listen to Journey Through Time wherever you get your podcasts.
Podcast: The Rest Is Classified
Hosts: David McCloskey (ex-CIA analyst & spy novelist), Gordon Corera (veteran security correspondent)
Release Date: November 5, 2025
Episode Theme: The secret history of Crypto AG – the Swiss cryptology company covertly owned by the CIA and BND, allowing Western intelligence agencies unprecedented access to the encrypted communications of governments worldwide. This episode unpacks the operation’s inner workings, ethical dilemmas, and its global impacts, with particular attention to its role in Cold War geopolitics, intelligence cooperation and failures, culminating in its unraveling.
This episode continues the two-part exposé on Crypto AG, a supposedly neutral Swiss cryptology company. Running from the post-WWII era into the 21st century, Crypto AG secretly sold rigged encryption machines to over 130 countries, while its covert owners—the CIA and West German BND—siphoned huge swathes of global diplomatic and military communications. The hosts dissect how Crypto AG’s secret infiltration reshaped espionage, enabled major intelligence coups (including the Falklands War), and ultimately collapsed due to persistent secrecy cracks, engineering ethics, and shifting geopolitical alliances.
“It’s kind of built on a lie… he must have been so ideologically committed, I think, to this and probably got some secret thrills out of it.”
– David McCloskey (07:24)
“There’s absolutely no evidence of foul play here.”
– David McCloskey (12:01)
"The BND pick it up and… hand it over in an underground car park in Munich to the CIA… I mean, you just imagine literally bags of cash…"
– Gordon Corera (18:49)
“Long tradition of Germans being shocked by spying on allies, which I think is total garbage. Personally...”
– David McCloskey (20:11)
“They can see what the Egyptians bottom line is… this is described as priceless intelligence.”
– Gordon Corera (21:09)
“Does that mean the US knew all about what these militaries were doing against their own people because they were inside their comms because of crypto ag?”
– Gordon Corera (23:57)
“Some of the engineers inside the company getting a little bit suspicious about things that they don't know… why are some of the flaws in the machines not being fixed?”
– Gordon Corera (26:38)
“By this point, you can start to see the secret starting to leak out.”
– Gordon Corera (34:39)
“It kind of shows the dark side…because an engineer…is actually part of an espionage operation… but unwitting.”
– Gordon Corera (35:50)
“I remember emailing the company and… I now know I was emailing a company which was still owned by the CIA at the time…”
– Gordon Corera (41:08)
“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…”
– David McCloskey (45:52)
“Do you know who is behind a company? Can you trust the kit that you've got?... most of us are not going to be able to kind of pull it apart and check the code and get into it.”
– Gordon Corera (46:46)
On Ethically Questionable Espionage:
“It does raise the question, well, does that mean the US knew all about what these militaries were doing against their own people because they were inside their comms because of crypto ag?”
– Gordon Corera (23:57)
On the Nature of Trust & Denial:
"We do this all the time with our phones, right?… you understand that you have vulnerabilities and you take it for granted."
– David McCloskey (38:00)
On the Modern Tech Landscape:
“Those are bigger companies than governments, frankly… and you can see… the UK government gets into battles with Apple about encryption…”
– Gordon Corera (44:16)
On Espionage’s Enduring Lessons:
“If I'm the Libyans, if I'm the Saudis, from the Pakistanis, if I'm the Argentines, I'm not going to buy encryption equipment… from an American company… but from a Swiss company… that's a different story.”
– David McCloskey (47:04)
With wit and measured skepticism, McCloskey and Corera illuminate how an operation born of friendship, cloak-and-dagger deals, and opportunistic secrecy shaped global intelligence for half a century. From Cold War tunnels, to Argentinian dictators, to the dilemmas of encryption today, Crypto AG’s saga is both a history lesson and a cautionary tale about trust, technology, and the ever-blurring lines between privacy and espionage.
For more, join the Declassified Club, send questions via your most trusted encrypted app, and stay tuned for future episodes diving deeper into legendary intelligence exploits.