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Hagelin-Cryptos · 1950-2019

Crypto AG was a manufacturer of cryptographic and communications equipment, based in Stein­hausen (Switzerland), with a world-wide customer base and offices in several countries. It was established in 1952 1 by Russian-born Swede Boris Hagelin, who gradually moved the activities of his Swedish company AB Cryptoteknik to Switzerland after restrictive laws had been proposed in Sweden. As a tribute to its founder, the company logo was based on his name. Crypto AG was liquidated on 31 October 2019 after its activities had been taken over by Crypto International AG.

 Crypto AG (Hagelin) cipher machines

Click to see the cipher machines

As Switzerland is a neutral country, Crypto AG could do business througout the entire world, with virtually no restrictions. The company's ownership has always been a mystery, supposedly even to the management [1]. In the past, the company has often been accused of providing backdoors to make their devices readable for foreign intelligence agencies. Crypto AG has always denied this.

It has meanwhile become clear that from 1951 to 1960 a Gentleman's Agreement (GA) existed between Boris Hagelin and the US National Security Agency (NSA), and that from 1960 to 1970, Crypto AG had a licencing agreement with the American Central Intelligence Agency (CIA) [12].

Ownership of Crypto AG -- click for further information

But the most striking discovery was that, in 1970, Crypto AG had secretly been purchased by the German BND and the American CIA, in a project known as Operation THESAURUS — later renamed RUBICON. In 1994, the CIA became the sole owner, and in 2019 the company was dissolved, after the product range and some personnel had been taken over by Crypto International AG [12]. On 3 July 2020, following actions by the Swiss Government, Crypto Internal fired its entire staff [15].

 More about Operation RUBICON

  1. More precisely: the company was founded in 1950, but did not become operational until 1952.

Related subjects
Crypto AG (Hagelin) cipher machines and other cryptographic devices
Boris Hagelin (2 Jul 1892 - 7 Sep 1983)
William (Bill) Friedman (24 Sep 1891 - 12 Nov 1962)
Crypto AG house magazines
The Gentleman's Agreement -- a non-written agreement between NSA and Hagelin
Operation THESAURUS / RUBICON -- the secret purchase of Crypto AG by CIA and BND
Company names
The history of Crypto AG starts around 1922, when Russian-born Swede Boris Hagelin was asked by the Swedish Nobel family to become a financial controller at AB Cryptograph in Stockholm — a company involving Arvid Gerhard Damm. The Nobel family had put a significant sum of money into the business and wanted the son of a friend, Boris Hagelin, to look after their investment.

By 1925, Hagelin had become the acting director of the company, whilst AG Damm was persuing business in France. In the meantime, Hagelin had developed the B-21, a cipher machine that was based on Damm's erlier design of the B-18. He improved the design by adding his (now) famous pin-wheels, and offered it to the Swedish Army.

After AG Damm died in 1927, AB Cryptograph was liquidated in 1932 and replaced by AB Cryptoteknik, Hagelin's first own company. In 1935, he developed the C-35 at the request of the French Army — the first of the C-machines.
Boris Hagelin at his 80th birthday on  July 1972

The C-35 was followed by the C-36 — the machine that would change his life. At the outbreak of WWII, he took the machine to the US, where an improved version became known as the M-209. By the end of the war, over 140,000 units had been built in America, and Hagelin was a millionaire.

After the war, when Sweden was about to introduce several restrictive laws, Hagelin decided to move to neutral Switzerland, where he settled down in Zug under the name Crypto AG. After a brief cooperation with Dr. Edgar Gretener involving online cipher machines, he decided to go his own way, and developed the TC-52. Over the course of the following years, the business was gradually moved from Stockholm (Sweden) to Zug (Switzerland), where it remained until 2021. 1

 More about Boris Hagelin
 Read Hagelin's personal biography (English)
 Original manuscript of the biography (German)

  1. In 1966, the company moved to nearby Steinhausen. In 2019, Crypto AG was liquidated after its portfolio and personnel had been taken over in 2018 by Crypto International AG.

Over the years, Crypto AG has regularly been accused of selling rigged equipment or, in more popular terminology: equipment with a backdoor, which makes some of the devices readable for certain Intelligence agencies (such as the NSA). As Crypto AG was based in (neutral) Switzerland, they were able to supply equipment to most countries in the world with virtually no restrictions.

Despite Hagelin's worldwide success and the lack of evidence of rigged machines, the rumours were persistant, not least because of the increased suspicion from people within the company. Some of them reached out to the press – such as in the case of sales representative Hans Bühler (see below) – and sometimes the press reached out to them. In December 1995, The Baltimore Sun published a series of short articles [10] about how the NSA had supposedly influenced the machines of the Swiss company Crypto AG. Such stories were always rejected as 'pure invention'.

In 2014, it came to light – from released documents of the Friedman Collection – that there had been some kind of Gentleman's Agreement between Hagelin and the NSA from 1951 onwards. As part of this deal, Hagelin would not sell secure machines to certain countries. And in February 2020, ZDF, SRF and The Washington Post revealed that in 1970 the company had been secretly purchased by the BND and the CIA, and that from 1994, CIA had been the exclusive owner [12].

 The Gentleman's Agreement (1951-1969)
 Operation RUBICON (1970-2018)

The Friedman Collection
In 2014, the NSA released more than 7600 documents [5], amounting to over 52,000 pages of historical material relating to the career of William F. Friedman (1891-1969), who is considered the dean of American Cryptology. Although some documents have been fully declassified, most of them are still heavily redacted as – according to the NSA – they may contain information that could harm national security or any individuals or companies mentioned in those documents.

It is no secret that, at a personal level, Hagelin and Friedman were good friends. They both grew up in the Russian Empire, and shared an interest in historical cipher machines. Furthermore, they both suffered from depressions. The two became friends during WWII, after Hagelin had 'escaped' to the US in March 1940 and sold the design of the M-209 cipher machine to the Americans, who built no less than 140,000 of them. After the war, they maintained their friendly contact.

Among the released documents are hundreds of letters between Friedman and Hagelin. Most of these letters are of a personal nature, but some of them contain explicit NSA material. Much of this material was confiscated by NSA several years after Friedman's death. An AFSA report of 12 April 1951 speaks of: AFSA negotiation via C/A with Mr. Hagelin of AB Cryptotechnik.

In a memorandum of 5 February 1954, the NSA expresses its concerns about newly announced Hagelin cipher machines, such as the CX-52 and the T-52, and asks Friedman to investigate this.
William Friedman (1891-1969), top cryptologist of the NSA

Friedman is allowed to make a proposal to Hagelin on behalf of the director of the NSA (DIRNSA). It is further agreed that Friedman will use his personal stationary and his home address for any further correspondence with Hagelin, in order not to ring any bells. The result is that Hagelin and DIRNSA enter into what they call a Gentleman's Understanding. In the following years, the details of the understanding – by then known as the Gentleman's Agreement – are revised several times.

 The Gentleman's Agreement

The Hans Bühler affair
In 1992, Crypto AG's top sales representative – Hans Bühler – was arrested in Iran on dubious grounds. He spent the next nine months in an Iranian prison – where he was interrogated three times a day – and was released in January 1993, after a bail of US$ 1,000,000 had been payed.

After his release, he was severely traumatised, and claimed that the company had not done enough to expedite his release. He also claimed that the cipher machines that Crypto AG had sold to Iran (and to other countries) were rigged; in other words: that they contain a backdoor — a matter the Iranians had questioned him about.

In the following months, Bühler got caught in a tangle of disputes, which eventually caused him to get fired. This didn't stop him from talking to the press though, and became the subject of Res Strehle's book shown in the image on the right.
Cover of the book 'Verschlüsselt, Der Fall Hans Bühler'

Since Hans Bühler went public, some of his former colleagues have decided to step forward as well. Former software engineer Jürg Spörndli confirmed that the company was visited frequently by NSA specialists and that on several occasions he was instructed by his manager to swap his crypto­graphic algorithm, for an alternative one (allegedly supplied by the NSA) that was clearly weaker [14]. This case is very similarity to the deliberate weakening of the Philips PX-1000.

The Swiss Federal Police investigated some of the allegations but said it was not able to find any proof. In February 2020 it was revealed that at the time of the Bühler affair, the company – Crypto AG – was jointly owned by the German BND and the American CIA, which means that Bühler and his dissident colleagues had been right all along. According to internal CIA and BND documents, the case of Hans Bühler – to them known by the cryptonym HYDRA – was the most damaging one in the history of Operation RUBICON — the secret purchase of Crypto AG (MINERVA). In fact it was one of the reasons for the German Government to back out of the covert operation in 1994 [12].

 More about Hans Bühler

In February 2020, it was revealed that for many years, Crypto AG had been owned jointly by the German Bundesnachrichtendienst (BND) and the American Central Intelligence Agency (CIA). In a secret project, that was internally known as Operation THESAURUS (later: RUBICON), BND and CIA had bought Crypto AG in June 1970. It gave the agencies control over Crypto AG's algorithms, and allowed them – indirectly – to control its customers. It made the equipment that was used by governments all over the world – including some of their Western partners – readable to them.

 Operation RUBICON

The split   2018
In January 2018 — well before Operation RUBICON became known to the public — it was announced that on 1 February 2018, the company would be split into two new companies that would handle the national and the international (Cyber) security business respectively [9]. The approximately 150 staff would be split evenly between the two companies:

Both companies remained in Zug (Switzerland), although the international branch was now part of the Swedish Crypto International Group AB, owned by the Swedish entrepreneur Andreas Linde. The national branch was the result of a management buyout, led by Robert Schlup, Giuliano Otth (previously the CEO of Crypto AG) and Thomas Meier (CEO of the affiliated InfoGuard AG).

Note that Crypto International AG was a completely new firm, registered at the existing address, whilst the original Crypto AG was officially liquidated on 31 October 2019. The company's assets were transferred to The Crypto Group AG (TCG) on the same day. The assets of the licencing company – Prime Technology Licencing AG (PTL) – had already been transferred to TCG on 17 January 2018. PTC was liquidated on 17 January 2018. TCG is in liquidation (August 2023) [19].

The downfall   2020
Following the revelations of the secret Operation RUBICON in February 2020 by The Washington Post, ZDF Television and SRF Television, the Swiss Goverment withdrew the export licence of Crypto International AG, pending a formal investigation by the Swiss Parliament and a criminal investigation by the Swiss Federal Police. On 3 July 2020, the Swiss newspaper Neue Züricher Zeitung (NZZ) revealed that Crypto International AG was to layoff 83 of its 85 employees [15].

On 11 February 2021, the company moved its legal seat from Steinhausen to a new address in Hünenberg and updated its website accordingly.

By June 2021 the old premises in Steinhausen was abandonned and the famous CRYPTO-logo with the stylish was removed from its facade.

According to the local newspaper Zuger Zeitung, plans were underway for demolition of the 1966 factory and the administration buildings to make room for approx. 200 appartments [16].
1 April 2021 - the CRYPTO logo is removed from the building in Steinhausen. © Copyright Patrick Hürlimann Fotografie [17].

The image above was made on 1 April 2021 by professional photographer Patrick Hürlimann in Steinhausen, when the company logo was removed from the now abandonned building in Stein­hausen. Over the course of the past year, Patrick has made an impressive series of photographs of the downfall of the once so dominant and famous Swiss company [17].  More photographs

House magazines
For many years, Crypto AG issued a house magazine at regular intervals – typically three times a year – that was sent to its international customer base. In later years, these magazines were also available in different languages.

As these magazines give a good insight in the history of the company and its products, we have made some of them available for download.

 Overview of Crypto AG Magazines
Crypto AG house magazines

The timeline below provides a graphical presentation, in chronological order, of the ownership of the company, its predecessor, its successors and important events in its history. It also shows the involvement of (foreign) intelligence services, in particular the Gentleman's Agreement with the NSA (1951-1960), the Licencing Agreement with the CIA (1960-1970) — also known as SPARTAN — and the MINERVA purchase (1970-2018) — also known as Operation THESAURUS or RUBICON.

CyOne – initially known as Crypto Schweiz AG – was split-off on 1 February 2018 in the form of a management buyout led by Robert Schlupp, Giulliano Otth (then CEO of Crypto AG) and Thomas Meier (then CEO of InfoGuard). The company took over part of the Crypto AG assetts and part of the workforce. They are currently active in the cyber security market.

InfoGuard (CIA: AURORA) was a subsidary of Crypto AG, established in 1988 as a vehicle to sell equipment to the civil market. From 1989 to 1991, InfoGuard was a joint venture between Crypto AG and Ascom, and from 1991 onwards a full subsidary of Crypto AG again. On 25 January 2018, InfoGuard was plit-off as result of a management buyout lead by the same people as in the CyOne buyout: Robert Schlupp, Giulliano Otth (then CEO of Crypto AG) and Thomas Meier (the current CEO of InfoGuard). Like CyOne, this company is active on the cyber security market.

Crypto International AG, was a new company – owned by the Swedish entrepreneurs Andreas and Emma Linde – that took over the international business of Crypto AG, part of its workforce and the premises in Zug on 1 February 2018. Shortly after Operation RUBICON was publicly exposed, the company was largely dismantled in 2020/2021, as its export licence had been revoked.

  1. Declassified by NSA on 17 June 2014 (EO 13526).

  1. Boris Hagelin, Die Geschichte der Hagelin-Cryptos
    Original manuscript by Boris Hagelin in German language. Zug, Fall 1979.

  2. Boris Hagelin, The Story of Hagelin Cryptos
    English translation of the above. BCW Hagelin, Zug, Spring 1981. Later edited by David Kahn and published in Cryptologia, Volume 18, Issue 3, July 1994, pp 204-242.

  3. Hans Stadlin, 100 Jahre Boris Hagelin 1982-1992 (German)
    Crypto AG. Crypto Hauszeitung Nr. 11. Jubilieumausgabe September 1992.

  4. Wikipedia, Crypto AG
    Retrieved July 2015.

  5. NSA, William F. Friedman Collection of Official Papers
    Retrieved July 2015.

  6. Bruce Schneier, NSA backdoors in Crypto AG Cipher Machines
    11 January 2008. Retrieved July 2015.

  7. Bruce Schneier, Crypto-Gram, June 15, 2004 - Breaking Iranian Codes
    15 June 2004. Retrieved July 2015.

  8. BBC Radio 4, Document - The Crypto Agreement
    Evidence of a secret deal between Crypto AG (Hagelin) and the NSA.
    28 July 2015, broadcast, presented by Gordon Corera.

  9. Crypto AG, Crypto AG is gearing up for future growth
    24 January 2018.

  10. Scott Shane & Tom Bowman, Spy string: Few at the Swiss factory knew...
    Baltimore Sun, 10 December 1995.

  11. Scott Shane & Tom Bowman, NSA's ... Rigged encryption machines
    Baltimore Sun, 10 December 1995.

  12. Paul Reuvers & Marc Simons, Operation RUBICON
    Crypto Museum, 19 March 2020.

  13. Verschlüsselt, Der Fall Hans Bühler
    ISBN 3-85932-141-2. 1994.

  14. Line Dugstad & Osman Kibar, Den skjulte partneren
    Dagens Næringsliv. Website. 2 january 2015 (updated 13 February 2015).

  15. Marcel Gyr, Crypto International enlässt fast die gesamte Belegschaft —
    als Folge eines fragwürdigen Enscheids des Bundesrats
    Neue Züricher Zeitung (NZZ), 3 July 2020.

  16. Zuger Zeitung, The final dismantling of Crypto AG
    8 June June 2021. Photographs: Patrick Hürlimann, 7 April 2021.

  17. Patrick Hürlimann, Taking down the CRYPTO logo from the building in Steinhausen
    1 April 2021. Reproduced here with permission from the artist.

  18. Monetas Handelsregister, TCG Legacy
    Retrieved August 2023.
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© Crypto Museum. Created: Friday 17 July 2015. Last changed: Sunday, 03 September 2023 - 07:19 CET.
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