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Crypto AG and Operation Rubicon

Abstract

For half a century governments that trusted neither Washington nor Moscow bought their cipher machines from Crypto AG in Steinhausen, in the Swiss canton of Zug. The company was founded by the Swedish engineer Boris Hagelin, whose M-209 had been the US Army’s field cipher in the Second World War, and its machines were sold to well over a hundred countries. From 1970 it was secretly owned by the CIA and the West German BND, which weakened the machines so that they could read their customers’ traffic. The arrangement, called Operation Rubicon, became public in February 2020. This article tells the machine history and the scandal; for the wider context see Cryptography: The Secret Science.

Hagelin

Boris Hagelin was born on 2 July 1892 in Azerbaijan, where his father managed an oil company. He went to school in St Petersburg and studied mechanical engineering in Stockholm. Instead of a career in oil he joined the Swedish cipher-machine company AB Cryptograph. His machines worked with pins and lugs rather than wired rotors, and the M-209 derived from them became the standard field cipher of the American army in the Second World War and made him rich. German codebreakers could read it, and its principle went into the Wanderer SG 41, a German cipher machine of 1944. Hagelin became a close friend of the American cryptologist William Friedman.

In 1948 Hagelin moved to Steinhausen in Switzerland, partly for tax reasons, and in 1952 founded Crypto AG there as the successor to AB Cryptograph (see Switzerland’s Tech Industry). Its first great product, the CX-52, developed from the M-209, had six pin wheels and a drum of sliding bars.

The HX-63

In the 1950s Hagelin began work on a rotor machine with electrical wiring in the style of the Enigma, finished in 1963 as the HX-63. It used nine rotors chosen from a set of twelve, each with 41 contacts on each face, fifteen more than the alphabet had letters, and was wired so that every current passed through the rotor stack four times instead of twice. The number of possible settings was about 10600, equivalent to a two-thousand-bit key; it was effectively unbreakable. Comparable machines of the time were the NSA’s KL-7, the Soviet Fialka and the Swiss army’s Enigma-derived Nema.

That got the NSA’s attention. The friendship between Hagelin and Friedman had produced an understanding by which Crypto AG supplied its best machines only to friendly and NATO states, and kept the American and British services informed about its sales, as documents released in 2015 showed. About a dozen HX-63s went to the French army; then the machine disappeared from the market. Crypto AG moved from electromechanical to electronic cipher devices, whose algorithms the NSA helped to design.

Rubicon

In June 1970 the CIA and the BND bought Crypto AG for $5.75 million, in an operation first called “Thesaurus” and later “Rubikon.” Its machines, sold on the strength of Swiss neutrality, were rigged so that the two services could read the messages encrypted with them. According to a CIA history leaked in 2020, at times more than 40 per cent of the NSA’s machine decryption came from Rubicon; the operation contributed intelligence on Chile in 1973, the Camp David negotiations of 1978, the Falklands War of 1982 and Libya in 1986.

The secret nearly broke in March 1992, when Iran arrested Crypto AG’s top salesman, Hans Bühler, on suspicion of supplying compromised machines. He was held for nine months and released in January 1993 after Crypto AG posted a million dollars’ bail; the company then dismissed him. The BND left the operation and sold its share to the CIA in 1993–94 for about $17 million. The CIA kept the company until 2018, when Crypto AG was liquidated: CyOne Security took over the Swiss business and Crypto International, founded by the Swedish entrepreneur Andreas Linde, the international one.

Exposure

On 11 February 2020 the Washington Post, the German broadcaster ZDF and the Swiss broadcaster SRF published the story, based on internal CIA and BND histories. A Swiss parliamentary inquiry concluded in November 2020 that the Swiss intelligence service had known of the operation and benefited from it. Hagelin himself did not live to see the revelation; he died in Zug on 7 September 1983. Machines from his company are on display in the cryptology department of the Heinz Nixdorf MuseumsForum.

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