The Rest Is Classified – Episode 97: Selling The World's Secrets — Why The Brits Won The Falklands War (Ep 2)
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.
Main Theme & Purpose
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.
Key Discussion Points & Insights
1. Succession Crisis at Crypto AG (04:00–11:00)
- Boris Hagelin, the founder, had a close secret arrangement with US signals intelligence pioneer William Friedman, giving the US access to "secure" encryption machines.
- As Hagelin prepares to retire in the 1960s, his son, Bo Jr., is groomed as successor—but is kept in the dark about CIA involvement.
- Strains emerge: Bo Jr.’s approach (e.g., selling fully secure machines to non-allied nations) threatens the intelligence operation, prompting US agencies to see him as a liability.
- Bo Jr.’s sudden, suspicious car crash death (10:19–11:53) removes an obstacle for CIA control, though hosts note no direct evidence of foul play.
“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)
2. CIA and BND Takeover & Secrecy Machinery (12:19–19:27)
- NSA loses interest; CIA steps in, valuing the human, “salesman” aspect of infiltration.
- The Germans (BND) become co-owners, each taking half, after CIA Director Richard Helms skillfully excludes the French to keep the operation “in the family.”
- Ownership is laundered through Liechtenstein shell companies; even Crypto AG staff are oblivious.
- Bags of cash are handed over in Munich parking garages—spy fiction, made real.
"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)
3. Signals Intelligence Bonanza & Global Impact (20:25–25:40)
- Through Crypto AG, the US and partners cracked the secrets of more than 130 countries, including Egypt during Camp David, Iran during the hostage crisis, Libya, and most of Latin America during years of dictatorship and repression.
- Discussion of the ethical dilemma: Did the US knowingly overlook or enable regimes’ atrocities by having deep insight into their operations?
- The system almost unravels after suspicious engineers and angry countries (notably Argentina) confront the company’s vulnerabilities.
“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)
4. Engineering Whistleblowers, Paranoia, and Technical ‘Leaks’ (26:38–29:47)
- As engineers at Crypto AG notice anomalies, secret patches, and vulnerabilities, suspicions snowball.
- At least one engineer is fired for fixing a flaw that then blocks US intelligence from reading Syrian codes.
- In Argentina, military officers nearly expose the whole ruse—yet ultimately see advantage in keeping quiet to spy on neighbors.
“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)
5. Cold War Codenames and Internal Controls (29:47–34:39)
- CIA and BND install a Swedish technical insider codenamed "Athena," to manage engineering suspicion and smooth over doubts with clients.
- Operation’s codenames evolve: Crypto AG as "Minerva"; overall operation as "Rubicon" (a cooler name than the NSA’s bookish original: "Thesaurus").
- The Falklands War (1982): British success (and Dutch involvement) showcases the operation’s strategic edge—yet nearly exposes its existence to public scrutiny.
“By this point, you can start to see the secret starting to leak out.”
– Gordon Corera (34:39)
6. Revelations, Morality, and Endgame (38:00–44:16)
- The 1986 Berlin disco bombing (by Libya), US airstrikes, and the 1992 "Hydra affair"—when an unwitting Crypto AG salesman is detained in Iran—showcase dangers to innocent employees and growing international suspicion.
- Investigative journalists (like James Bamford, Scott Shane, and Gordon Corera himself) begin piecing together the truth, but for decades authorities (and clients) remain in denial.
“It kind of shows the dark side…because an engineer…is actually part of an espionage operation… but unwitting.”
– Gordon Corera (35:50)
- By the 1990s, Western European intelligence services—including the French and Dutch—are all aware of the ruse, increasing pressure on the BND (Germans) to exit for diplomatic reasons and to avoid exposure.
- CIA buys out the Germans’ share, continuing solo until the final sale in 2018; the new buyers, in an ironic twist, have no idea they’re acquiring a CIA front.
“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)
7. Modern Parallels and Unsolved Questions (42:59–48:19)
- The hosts compare Crypto AG to potential 21st-century equivalents (e.g., a globally popular encrypted messaging app secretly backdoored by intelligence).
- Fears about trusting imported technology—parallels to global debates about Huawei, Chinese kit, and state backdoors.
- The hosts revisit why the story was plausible for so long: denial, technical complexity, and the irresistible lure of convenience over perfect security.
“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)
Notable Quotes & Moments
-
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)
Segment Timestamps (MM:SS)
- 04:00 – Introducing the succession crisis at Crypto AG; Bo Jr. and father-son tensions
- 10:19 – Bo Jr. dies in a car crash; discussion of conspiracy theories and convenience
- 12:19 – Transition to CIA and BND ownership; Liechtenstein shell companies
- 18:49 – Cash handoffs in Munich parking garages; secrecy among employees
- 20:25 – Intelligence bonanza: Camp David, Iran, Libya, Latin America
- 26:38 – Engineers’ suspicions, whistleblowers, and Argentina's near-exposure
- 29:47 – CIA/BND install “Athena”; dangers of technical leaks
- 34:39 – The Falklands War, Britain’s intelligence advantage, potential exposure
- 38:00 – Libyan bombing, Hydra Affair, Iran abducts a Crypto AG salesman
- 40:06 – Gordon Corera’s reporting, declassified documents, CIA ownership into 2018
- 42:59 – Could it happen again? Modern analogues in secure messaging apps, Huawei fears
- 47:04 – Universal intelligence lesson: trust, third-party tech, and the enduring value of corporate fronts
Final Thoughts
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.
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