How the FBI's fake cell phone company put criminals into real jail cells

0:00Support for NPR and the following message come from Edward Jones. A rich life isn't always a straight line. Unexpected turns can bring new possibilities. With 100 years of experience navigating ups and downs, Edward Jones can help guide you. Let's find your rich together. Edward Jones, member SIPC. This is Planet Money from NPR. Andrew Young's journey into the tech world is very different from any founder story I've ever heard. It starts in 2018 in a hotel room in Las Vegas. It was a suite. It was a pretty nice suite. We needed a lot of room. There was approximately, I don't know, there was a lot.

0:45I would say 20 people total. In a hotel room in Vegas? Sounds like quite a party. Yeah. Felt like we're 22 again. The thing is, Andrew was a federal prosecutor. And the people he was in the room with, they were not exactly party people either. Yeah, it's swimming with FBI agents. This is Joseph Cox, the journalist I first heard this story from. He covers technology and crime. And he says, along with Andrew and those FBI agents, there were officials from Canada and Australia. And they're all waiting for a very special person to arrive. The special person was the CEO of a phone company called Phantom Secure.

1:27And whereas a traditional phone company prides itself in the clearest call quality or highest megapixel cameras, Phantom was different because Phantom made phones for criminals. What Phantom did was take BlackBerry handsets. They ripped out the GPS, the camera, the microphone, and then they put pretty sophisticated encryption technology on it, meaning that even if the police or the FBI did manage to intercept a phantom secure message, it doesn't matter. It's just going to be complete garbage to them, a series of ones and zeros and letters. And this was frustrating to law enforcement, because even if they could get a wiretap of one of these phones, they couldn't read what people were writing.

2:13And so Andrew knew that if he could unscramble these messages, he would have a treasure trove of evidence. If we can get in there, we can do 100 years worth of casework in a matter of months because we have all the evidence that would normally take years to gather. But that would require cooperation from the CEO of the phone company, Vincent Ramos. That was who they were waiting for in that hotel room in Vegas. So Ramos knocks on the door. And he sees two FBI agents there who identify themselves as FBI agents. So he's obviously confused. I think he said something along the lines of, well, I'm in the wrong place.

2:52They said, you're not in the wrong place. Andrew gets to work, tells Ramos, here's the situation. Here's all this evidence we have. We have a pretty solid criminal conspiracy case against you. We could arrest you right now, charge you in San Diego. But we'd rather make a deal. We'd rather you flip and give us a backdoor into your servers. They spend something like three days in that hotel suite negotiating around the clock. More and more officials keep popping out of the bedroom to talk with Ramos. At one point, you know, he asks how many people are even in that room because it's just almost like a clown car in a way and all these officials keep streaming out.

3:32They sleep there at the same time. It's a really, really unusual situation. And bit by bit, Ramos starts to come around to the idea of going back to San Diego with the officials. And so we are planning on leaving regardless the next day. With him, like saying, hey, we'll give you a ride to San Diego. He's getting a ride either way. It was sort of where he was going to sit in the car, was our thinking. But before the trek back to San Diego, they decide, let's get some rest. One person watches Ramos. Everyone else heads to bed. And I'm dead asleep when I got a call from one of the agents saying he's gone.

4:17And I was like, what do you mean he's gone? And Ramos is gone. He's not here. Ramos had escaped. The FBI put out an alert for him, launched a massive manhunt, and he's eventually found. But Andrew soon learns that while Ramos was on the run, he did manage to shut down a key server that the FBI would have needed for their backdoor. And right there, Andrew's dream of having a backdoor into the criminal underworld almost died. Except. I get this call from this lawyer I've never heard of. and who basically said, I want to meet you tomorrow. See, all the publicity around Ramos and his manhunt had scared other people in the encrypted phone industry.

5:05This lawyer worked for one of those people who had been working on his own phone for criminals. And the lawyer said his client wanted to make a deal. His offer is that the FBI can take this company and use it for their own investigations. So in other words, rather than the FBI investigating a company like Phantom Secure, inserting a backdoor, going through all of that pain, why doesn't the FBI just run its own encrypted phone company and then put in whatever backdoor they feel like? They could run a tech startup for organized crime. Hello and welcome to Planet Money. I'm Nick Fountain. What would that look like?

5:50the FBI running a tech startup for organized crime. It is a very fraught proposition. And yet, enticing? Today on the show, one of the weirdest tech companies of all time. How the FBI got into the cell phone business, and why, eventually, they had to get out.

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6:59What's in your wallet? Terms apply. See CapitalOne.com for details. This message comes from NPR sponsor, Veeam. AI promised intelligence, but it also exposed everything people couldn't see, like scattered data and hidden risks. Now, there's a new way forward where protection, governance, and AI trust move together. With Veeam plus Security AI, you can see your entire data estate in real time. Because when resilience, security, governance, and AI trust come together, innovation moves safely and faster. Learn more about accelerating safe AI at scale at Veeam.com. All right, so this episode is largely based on a new book by Joseph Cox.

7:44The book is called Dark Wire. It's terrific. There are so many incredible details in it about global organized crime, about laundering drug money. But today we are going to focus on the story of the kind of real but also kind of fake business the FBI would end up running. One of the people behind that business was Andrew, the prosecutor from earlier, who had dreamt of a backdoor into the criminal underground only to have that dream slip through his fingers. For him, the idea of the FBI running a tech company was a no-brainer. I was thinking I want to do it. I at least want to see if we can run it ourselves.

8:24I was coming off of what I felt like was a huge loss, and I still had this void. That was the big game. That was the Super Bowl, and we lost. And you may never get back to that. And so when this opportunity was pitched, I was like, this is a way to get back to the big game. Did you guys know how to run a tech company? No, no, none of us said run a tech company, but we recognize we're going to have to do this. It was too good of an opportunity to pass up. Because if they did this right, they could create a phone that was so specifically designed for doing crime, only criminals would want it. And if people use the phones, which the FBI could monitor, to document their crimes, well, that's a prosecutor's dream.

9:07Andrew and his team get to work. They strike a deal with the guy who had been working on the phone. He becomes, in law enforcement speak, a confidential human source. They put him on the payroll, in part because he already has the right reputation in the criminal underworld. They called the phone company Anom, maybe a play off the word anonymous. And then they run into a challenge that has doomed many early stage tech companies. We needed a quality product that worked. Yeah, this is key for any business. But Joseph says it was especially true for the FBI's phone company, Anom. The product had to be not just good.

9:45It had to be better than all of the other encrypted phone companies that were used by criminals because you wanted them to move over to Anom as well. The FBI had to not only make a pretty good encrypted phone company, they really had to try to make the best. Yeah, there were already some competitors out there. or other encrypted phone networks that criminals were using. And also, criminals could just go out and buy normal phones and use encrypted messaging apps like Signal or Telegram. The FBI needed to do better than all that. To attract the right customers, they'd need to make it seem like Anom was developed for criminals by criminals, who wouldn't respond to a subpoena like a big tech company might.

10:28They'd have to build a phone that was both feature-packed and super-secure. They decided to use off-the-shelf Android phones, Google Pixels actually, with a special secure operating system. And I love this part. The Anom messaging app, it was going to be hidden behind a fake calculator. When you type in a certain PIN code and press equals, the calculator fades away and the Anom app reveals itself. And Andrew and the FBI go further. They start requesting features that'll make Anom even better than their competitors. It's a pretty funny idea, a bunch of feds sitting around brainstorming different features they think criminals will like.

11:11But then how to use those very features to spy on their users. If we were going to give them the ability to take a photo and send a photo that was blurred, we needed the ability to undo it. if we're going to let them disguise their voices, then we needed to be able to undo it. And so we wanted to add as many features as we could because we knew it made a better product, but then we also had to figure out a way to undo it. They also got to do some things that normal businesses can't. For example, in their advertising, they could just lie. Like, the phones would be advertised as having the GPS permanently disabled.

11:47Of course, that was not true. Another thing, if your non-phone got confiscated by the police, they said you could wipe it remotely. This, of course, didn't matter because the FBI had already read and archived all your messages. So they've designed their feature-packed phone, both for criminals but also the cops spying on them. The next challenge Andrew faced, what to charge for the phones. I vividly remember having discussions about setting the price of it because we didn't want it to be too cheap. because we felt like we could have set any price we wanted to, right? We could have set it for$400,$500,$300.

12:25And the idea being like— Because the government would happily subsidize the cost of the device or whatever. Right. But we made a conscious decision not to do that because we didn't— for one, we were concerned that they would think, well, why are we getting this for so cheap? Right. And two, it's more of, I can't remember the economic principle, but it's that people will buy, you know, a luxury item that's... Ah, a Veblen Good. Yes, that one. And we're like, if we price it above everybody else, they're just going to think it's better. A Veblen Good is the rare product where as price increases, so does demand.

13:02Think an expensive handbag or a luxury car. And criminals, of course, don't want bargain basement prices when it comes to their security. If you signal that they're getting an ultra-premium product by charging an ultra-premium price, maybe they'll want it more. The nomsticker price would be$2 ,000 for a six-month subscription. That is, if they could get criminals to actually use these things. That is after the break.

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15:01Terms and conditions apply. This message comes from Insperity. Excellence takes drive, work, perseverance. Tiger Woods brings it to the course. Insperity brings it to your business. Want to be the best? Work with the best. Insperity. How you HR matters. Learn more at Insperity.com slash Tiger. Hey, it's Greg Rosalski. For generations, American politicians have talked about freedom as if it only means freedom from government. Nobel Prize-winning economist Joseph Stieglitz in a new book opposes that narrow view of freedom. So it's really what you are free to do. You know, somebody who is at the point of starvation doesn't really have much freedom.

15:44He does what he has to do to survive. In our latest bonus episode, I talk with Stieglitz about his conception of freedom and what he calls progressive capitalism, his vision of the government playing a more active role in the economy. That's for Planet Money Plus listeners. If that's you, thank you very much. If it's not, well, it could be. By signing up, you get sponsor-free listening and support NPR. Just go to plus.npr.org. So Andrew, our federal prosecutor, and the FBI, they have their phone. Anam is ready to go. But here's one weird wrinkle. Andrew never got permission from the higher-ups at the Department of Justice to spy on Anom phones in the U.S.

16:29See, in the U.S., running a wiretap requires convincing a judge that a crime is likely being committed. And Andrew says he was willing to go through that process every single time, but the powers that be at the Department of Justice never even let him get that far. In the end, the FBI decided to partner with law enforcement from other countries, including Australia, where in the fall of 2018, the first phones hit the streets. So Enom, it starts in Australia and it's slow at first. The product does not really take off with any great speed. This is kind of the make or break moment for Enom and for the FBI's ambitions of making a tech company.

17:13If their phones never take off, the whole thing would be a waste. Now, the FBI could not go out and sell the phones as the FBI. And so they turned to a familiar marketing technique. Were you guys doing influencer marketing of these phones? Yes, that's essentially what we were doing. And the influencers in this context happened to be the heads of these organizations. Yeah, they seeded the phones with real kingpins. people running international drug smuggling rings. This had a couple of upsides. For one, it showed that, you know, real, legit bad guys were using Anom, and they thought it was safe.

17:52And also because Anom devices could only communicate with other Anom devices, it created a sort of walled garden. This is what economists call the network effect. These kingpins of criminal networks would essentially tell people, you're not talking to me unless you're using Anom. And so then all the four guys below him get a nom. And then they go to their crews and say, well, if you want to talk to me, you've got to be on a nom. The FBI gave these influencers commissions based on their sales and their underling sales. And sometimes they even offered ownership of the company. In other words, equity.

18:27I do think at some point we had given away more than 100 percent.

18:34That's fraud, Andrew. Security is fraud. But, you know, it's all right. Andrew says these marketing techniques, they worked surprisingly well. Pretty soon, they had hundreds of people across many countries using the phones. And the FBI could see people were using them for all sorts of crimes. Massive drug deals, money laundering, ordering hits on their enemies, and also for other things. They loved to send each other photos, which was always shocking to us because so many of them were so unnecessary. What sort of photos are we talking about? they take pictures of their faces. Ah, selfies. You can think of it.

19:12Selfies, other types of photos. They love to send those to each other. Below the belt photos. Below the belt photos from friends, which was an interesting subculture phenomenon. And yeah, those. That's quite funny. It also just shows how absolute the criminals trusted Anom. Not only were they prepared to send information about their crimes across a NOM, they were prepared to send photos of their genitalia across it as well. Okay, we've talked about all the clever design that went into these phones and the software and the pricing decisions and the clever marketing. And all that is true and helped a NOM grow.

19:53But what really helped the FBI was a trick they had up their sleeve. Yes. The FBI is in a great position in that it doesn't have to play by the rules of ordinary business. It can disrupt its rivals in a very, very aggressive way. Remember, Anam was not the only game out there. There were other more popular encrypted phone companies like AnchorChat and Sky. The FBI and others had been investigating them for a while. And Andrew knew if those did get shut down, well, people would come to Anam. I said, buy 8 ,000 phones because you're going to need them. Because all those people have nowhere else to go and they're going to come to a nom.

20:35It's a business technique that not many businesses can do is get the authorities to shut down their competitors. But it works. Well, I reject the premise that that's what we were doing. But if it happened, I think it worked out better for everybody. Okay, whatever the reason, the competitors did indeed get shut down. And Andrew was right. Demand for Anom exploded. At one point, Joseph says, the FBI had to charter a plane to Europe and whisk eight duffel bags full of phones through Dutch customs. And this is normal, right? For any successful startup, there comes a time when their dreams take off.

21:20And then they hit the problem of scaling. Though in this case, the FBI had some unique additional problems with scaling. You know, if we know somebody's going to get killed, we have to try to do something about it. We don't have a choice. We have to do it. Which means they had to read every single message that went across their network. And if there was a threat to life, they had to intervene. And as the number of Anom phones out there grew from 100 to 1 ,000 to 12 ,000, reading all those messages became really hard. The FBI had dozens and dozens of agents working around the clock reading messages.

21:58And those threats to life, they started to multiply. So what would happen is that the FBI would detect a threat to life, and they would mitigate it somehow, they would warn the authorities or otherwise act, and then that one would be stopped, thankfully. But the criminals would start asking themselves, how the hell did the authorities know this? how did they know we were going to murder this person? And rather than suspecting the phones, they suspected each other. And then you have another threat to life because they want to kill who they believe is a snitch or a rat. And it started to create this never-ending cycle of violence and paranoia.

22:41All the while, the FBI is intercepting more and more messages. It has to call in more agents from around the country, please come to San Diego and help us dig through this information. It's too much. It's absolutely getting to the point where the FBI are finding it very, very difficult to maintain momentum or tempo on the amount of data that's coming in. Yeah. In the end, what led Anam to shut down was its own success. Two and a half years in, it just became too unsustainable, too dangerous for the FBI. So the FBI and their many foreign counterparts at this point, decide on an end date. The police raids would begin on June 7th, 2021.

23:26They followed the sun. The Australian federal police and state agencies there, they launched their own raids and then held their own press conference. Gentlemen, it's good to have you with us today. Saying that we have messages from Anon. As the sun moved over to Europe, European officials did basically the same thing. They launched their own raids with drones and SWAT teams and everything you would expect. And then they held a press conference in Europol, also announcing their involvement.

24:03Until eventually, the sun got over to the West Coast, to San Diego. These international arrests and the U.S. charges were possible because of a San Diego-based FBI investigation like none other in history. And the U.S. Attorney's Office there, they announced that the FBI and U.S. authorities have been running a NOM for essentially its entire existence. Thank you all. This was a big moment, the big reveal. The FBI and their counterparts have been running what Joseph calls the largest sting operation in history. Anom resulted in more than a thousand arrests. There was something like 150 threats to life mitigated.

24:50They seized tons upon tons of cocaine, methamphetamine, and other drugs, weapons as well. It really did generate a massive impact on the criminal syndicates that were swept into Anom. One important note. No one in the US was arrested because of Anom. Remember, Andrew never got permission from the higher-ups at the Department of Justice. To this day, he still finds this disappointing. But he says this operation, it was about more than arrests. It was about sowing doubt in the minds of organized crime. Sowing doubt in the very idea of an encrypted phone. See, authorities had not just shut down Phantom Secure and their main competitors, they'd also pushed users into what turned out to be an FBI front.

25:43And that kind of left organized crime with a conundrum. Who do you turn to now? You know, because the established legacy companies are all gone. And so any other company that shows up is brand new. and how do you know with certainty that that's not being run by the FBI, the DEA? So to me, our goal ultimately became, you know, to take this away as a tool. And I think for the most part, that worked. I do. Andrew readily admits that this operation, it didn't end crime forever. Other criminals have filled the vacuum that it left. But maybe now there's just a little more friction. It's just a little bit harder to do the business of crime.

26:31At least that's his hope.