UPDATE 2 - CIA, Germany's BND secretly owned key encryption firm

ADDS DETAILS THROUGHOUT

By Michael Hernandez

WASHINGTON (AA) - The U.S. Central Intelligence Agency (CIA) and Germany's Federal Intelligence Service (BND) secretly owned a Swiss company used by governments to send encrypted communications for decades, according to a report published Tuesday.

Crypto AG was used by U.S. allies and adversaries, including more than 120 countries. Among its clients were Iran, India, Pakistan and the Vatican.

None of them were aware of Crypto's ownership under the CIA-BND partnership, according to a CIA history and corresponding narrative from the German intelligence agency obtained by The Washington Post and German public broadcaster ZDF.

Both of the intelligence agencies rigged the encryption services sold by Crypto so that the communications that would ultimately be sent could be easily hacked.

“It was the intelligence coup of the century,” the CIA report obtained by the news outlets concludes.

“Foreign governments were paying good money to the U.S. and West Germany for the privilege of having their most secret communications read by at least two (and possibly as many as five or six) foreign countries.”

The CIA and the U.S. National Security Agency (NSA), which at the time was tasked largely with codebreaking, owned Crypto in partnership with the BND from 1970 on, with the American intelligence firms controlling "nearly every aspect of Crypto’s operations," according to the Post.

The BND would leave the operation in the early 1990s due to fears that the plot would be exposed, but the CIA then bought the former German shares, maintaining its control over Crypto until 2018, when it sold its shares, anonymous current and former officials told the newspaper.

By that time, the Post said, Crypto's importance had waned and electronic encryption had become the norm.

While they jointly held ownership over Crypto, the intelligence agencies each appraised the operation as wildly successful as the business generated millions of dollars in split profits.

But the partnership was not without its frictions. The CIA and BND repeatedly clashed over a series of issues that included expected squabbles over money and control but also lesser-presumed disputes over ethics. The BND, for its part, was "aghast" at the fervor that the CIA would exhibit when surveilling U.S. allies, according to the newspaper.

Among the allies the U.S. spied on were NATO members Turkey, Greece, Spain and Italy, the Post reported.

Two new companies purchased Crypto's assets after it was liquidated in 2018 -- CyOne Security and Crypto International.

Both now deny any relationship with intelligence services. But CyOne has "more substantial" links to the former company, including through its chief executive officer, who held that title for two decades when Crypto was owned by the CIA, the Post said.

Switzerland's government announced Tuesday that it is launching a probe into Crypto AG's ties to the CIA and BND and had earlier this month suspended the export license for Crypto International.

But the Post said the timing of the moves is "curious," given that the documents it reviewed indicate that Swiss government officials had to have known about the relationship for decades and "intervened only after learning that news organizations were about to expose the arrangement."