Infiltrating the Underworld: How the FBI Became Criminals' Favorite Phone Company

Today we make a departure from the style of topics we've been exploring lately and journey through a fascinating story. Of an unconventional approach to fighting criminals and how it all unfolded. I hope you enjoy it.

Communication is fundamental - whether it is underground or above. The more secure, the better, especially for those underground. For years, criminals have relied on encrypted phones to stay one step ahead of law enforcement. But in 2018, the FBI flipped the script in an audacious twist. Instead of going after criminals' phones, they became the criminals' phone company.

This is the story of ANOM, an encrypted phone startup with a secret caveat: it was run by the FBI. What began as a bold experiment would grow into what journalist Joseph Cox calls "the largest sting operation in history," netting over a thousand arrests across the globe. But as ANOM's success ballooned, the line between catching criminals and enabling them began to blur.

A Problem and a Wild Solution

For federal prosecutor Andrew Young, it started with long-term frustration. Law enforcement were struggling to catch up to the use of encrypted phones by criminals. Their core wiretapping strategy had altogether evaporated. "If we can get in there, we can do a hundred years' worth of casework in a matter of months," Young said. But how?

The answer came in an unlikely form: a tip from a lawyer representing someone in the encrypted phone industry. The pitch was shockingly simple - "Why doesn't the FBI just run its own encrypted phone company?" Cox said, summarizing the proposal. It was audacious, unprecedented - and tempting.

This was a second chance for Young, still stinging from a failed operation targeting another encrypted phone firm. "This is a way to get back to the big game," he said. And thus began the saga of the FBI getting into the tech startup business.

Building a Better Burner Phone

The team's first challenge was creating a product so good that only criminals would want it. And creating it well enough that criminals would choose it over competitors. They started with Google Pixel phones, added a secure custom operating system, and hid the ANOM messaging app behind a fake calculator. Type in the right PIN, and the innocent-looking calculator would fade away to reveal the encrypted messaging system.

Every feature under the hood of ANOM was designed to appeal to criminals as well as help law enforcement. Photo blurring that the FBI could undo. Voice disguising they could reverse. Fake 'permanent' GPS disablement, allowing the FBI to continue tracking criminal coordinates. Even the pricing was strategic - at $2,000 for a six-month plan, ANOM positioned itself as a luxury good. "If we price it above everybody else, they're just going to think it's better," Young explained.

Criminal Influencers

With the product ready, ANOM faced its next hurdle: adoption. It was slow going for a long time, until the solution came straight from the tech world playbook - influencer marketing, criminal style. The FBI seeded phones with kingpins who would spread the word. "You're not talking to me unless you're using ANOM," these criminal CEOs would tell their crews.

It worked almost too well. Soon hundreds of criminals across several countries were using the phones, to brazenly discuss massive drug deals, money laundering, even murder plots - all while sending each other a surprising number of selfies and "below-the-belt" photos. "It also just shows how absolute the criminals trusted ANOM," Cox noted.

The FBI had managed to make themselves indispensable to the criminal underground. And when rival companies were shut down by authorities, demand for ANOM exploded even further. Andrew's prescient advice - "Buy 8,000 phones because you're going to need them" - proved correct.

Too Much of a Good Thing

As ANOM grew from hundreds of users to thousands, a troubling dynamic emerged. The FBI was required to intervene if they saw threats to life in the messages. But each intervention made criminals paranoid. They trusted the phone so much that their first suspicion was snitches in their midst, which led to more threats. "It started to create this never-ending cycle of violence and paranoia," Cox said.

Meanwhile, the sheer volume of criminal chatter became overwhelming. Dozens of agents worked around the clock just to keep up with the firehose of incriminating information. The FBI's clever idea was scaling too fast. "It was absolutely getting to the point where the FBI were finding it very, very difficult to maintain momentum or tempo on the amount of data that's coming in," Cox explained.

The Sun Sets on ANOM

On June 7, 2021, it all came crashing down. In a coordinated wave of raids that "followed the sun" from Australia to Europe, authorities executed hundreds of search warrants and arrests. The big reveal on who was running ANOM dawned upon everyone as the spotlight shifted to the FBI.

The numbers were staggering. Over a thousand arrests. Tons of drugs and weapons seized. Around 150 threats to life prevented. Drug trafficking rings that spanned continents were dismantled. It was, by any measure, a massive blow to organized crime.

Yet questions lingered. The FBI never got approval to use ANOM evidence against Americans, leaving Andrew disappointed that no U.S. arrests resulted from all their work. And thorny issues remained around the ethics of law enforcement essentially operating a criminal enterprise; even if the goal was to stop crime.

The goal, Andrew says, was disruption - "to take this away as a tool." To inject doubt into the criminal ecosystem about whether any supposedly secure phone might actually be an FBI front. In that, they may have succeeded. "Who do you turn to now?" Andrew asked. In the post-ANOM world, criminals must wonder whether the next encrypted chat app might also be a Trojan horse.

A Risk Worth Taking?

The ANOM saga stands as a fascinating case study in the blurred lines between innovation and investigation in the digital age. It shows how law enforcement, faced with evolving criminal tactics, may resort to audacious and ethically murky methods.

Was the ANOM operation worth it? The results speak for themselves - a staggering blow to organized crime achieved through unorthodox means. Yet it prompts us to ponder: In our quest for security, how far is too far? Is there a point where the cure becomes worse than the disease?

What's certain is that the criminal world will never be the same. "Any other company that shows up is brand new," Andrew noted. "And how do you know with certainty that that's not being run by the FBI, the DEA?"

In the cat-and-mouse game between criminals and cops, ANOM represented a dramatic escalation - law enforcement beating criminals at their own game by making the criminals' favorite tools. The question now is not just what criminals will do next, but what authorities might do to counter them.

Parallels to the Silicon Valley Struggles of Everyday Startups

The parallels between ANOM and a conventional startup are striking. From product development tailored to user needs (albeit nefarious ones), to influencer marketing via criminal kingpins, to rapid scaling that outpaced operational capacity—ANOM's trajectory mirrored that of many a unicorn. Yet, like so many startups that flame out after meteoric rises, ANOM ultimately couldn't sustain its own success.

In today's world, what might the FBI have done differently to weather this storm? Perhaps they could have leveraged AI to sift signal from noise in massive datasets. Automating the initial triage of threats could have kept ANOM's small team from drowning in data. Siloing teams to handle different geographic regions or types of crime might have helped manage the workload without losing the forest for the trees.

In the end, ANOM's tale is one of disruption—that Silicon Valley buzzword—taken to its extreme. The FBI disrupted individual criminal networks as well as the very ecosystem of trust underlying encrypted communications. Yet as with most disruptions, new players will emerge as customer demands will evolve. So will the case be in the criminal world.

For now, in boardrooms and back alleys alike, one thing is certain: everyone is eyeing their phones a little more warily, wondering what other surprises might be lurking behind that innocent-looking calculator icon.

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