Report on CIA ownership of cryptography company raises questions for Swiss government

04 March 2020

The H-460 desktop cipher machine developed by Hagelin in Switzerland during the late 1970s is pictured in the Crypto Museum in Eindhoven, the Netherlands, on 30 January 2020. Crypto AG, a predecessor of Crypto International, was a Swiss company that was secretly owned by the CIA in a highly classified partnership with German intelligence. Source: Jahi Chikwendiu/The Washington Post via Getty Images

Press reports in February confirmed that a prominent Swiss cryptography company was run by US and German intelligence for almost half a century, raising difficult questions for the Swiss government. An article published in The Washington Post on 11 February provided the most detailed account to date of the relationship between Swiss firm Crypto AG and US intelligence. Much of the relationship had already been documented in open sources, and the report noted that "U.S. and German officials did not dispute the authenticity of the documents".

Crypto AG was founded in Switzerland after the Second World War by Boris Hagelin. In 2015, BBC Security Correspondent Gordon Corera used declassified US National Security Agency (NSA) documents to confirm the existence of a secret agreement between Hagelin and US cryptographer William Friedman. Under this 'gentleman's agreement', Hagelin would restrict the sale of his most secure machines to a list of states approved by the United States.

In 1960, this arrangement was formalised into a 'licensing agreement' with the CIA, with the US intelligence services enjoying an increasingly close relationship with the company. The Washington Post report claimed that the workings of Crypto AG's first all-electronic machine, released in 1967, were "completely designed by the NSA". In June 1970, the CIA and the German foreign intelligence service, the Bundesnachrichtendienst (BND), secretly purchased Crypto AG.

The NSA's role in the design of the cryptographic algorithms used in Crypto AG's machines meant that the agency was more easily able to break the encryption used by the company's customers. The Washington Post report did not detail the weaknesses in the encryption devices that Crypto AG sold to foreign governments. The report nevertheless cited a senior NSA analyst as stating that a random number generator could be designed that would appear effective but which "would repeat itself at short enough intervals for NSA experts - and their powerful computers - to crack the patterns".

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