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Crypto AG   MINERVA
Hagelin-Cryptos

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 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].


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) The Gentleman's Agreement -- a non-written agreement between NSA and Hagelin
GA
Operation THESAURUS / RUBICON -- the secret purchase of Crypto AG by CIA and BND
Company names
History
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 Arvid Gerhard Damm's company AB Cryptograph in Stockholm. The Nobel family had put a significant sum of money into Damm's business and wanted the son of a friend, Boris Hagelin, to look after their uncertain 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 is still located today.

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


Controversy
Over the years, Crypto AG has regularly been accused of selling rigged equipment or, in more popular terminology: equipment with a backdoor, that 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, on 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, and that he was repeatedly questioned over that.

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 (supposedly supplied by the NSA) that was clearly weaker [14]. This case shows great similarity with the deliberate weakening of the 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 joint venture in 1994 [12].

 More about Hans Bühler

Operation THESAURUS / RUBICON
In February 2020, it was revealed that for a long time, 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), the BND and CIA had been able to buy Crypto AG in June 1970. It gave the agencies the possibility to control Crypto AG's algorithms and – indirectly – 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, it was announced that on 1 February 2018, the company would be split into two new companies that would handle the national and the inter national (Cyber) security business respectively [9]. The approximately 150 staff would be split evenly between the two companies:

Both companies will remain in Zug (Switzerland), although the international branch is now part of the Swedish Crypto International Group AB, 1 owned by the Swedish entrepreneur Andreas Linde. The national branch is 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 is 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 currently in liquidation (Jan 2020).


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

References
  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. Crypto Museum, Operation RUBICON
    February 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).
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© Crypto Museum. Created: Friday 17 July 2015. Last changed: Friday, 17 April 2020 - 21:19 CET.
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