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'Planet Money': How the FBI's fake cell phone company put criminals into jail cells

MICHEL MARTIN, HOST:

Well, this sounds like something out of a movie, but it's true. For years, the FBI had an unprecedented peek into drug smuggling networks. They revealed this a few years ago. All that time, they had been secretly running a smartphone company. They'd gotten criminals to buy the phones and use the phones to snoop on them. Nick Fountain from our Planet Money podcast has been talking to one of the people behind the operation.

NICK FOUNTAIN, BYLINE: In 2018, federal prosecutor Andrew Young was approached by someone who was looking to avoid jail time. The guy had been developing a phone designed specifically for criminals to communicate securely. But he'd had a change of heart. Would Young and the FBI like to run it?

ANDREW YOUNG: This idea was crazy from the beginning.

FOUNTAIN: But if they could pull off creating a phone good enough that criminals would document their crimes on it, well, for a prosecutor like Young, that's the dream.

Did you guys know how to run a tech company?

YOUNG: No. No, none of us had run a tech company.

FOUNTAIN: But they got to work. The first challenge - packing the phone with features they thought criminals might like. They made it possible to blur photos, distort voice memos. And my favorite - the messaging app they developed - it was hidden behind the phone's calculator.

JOSEPH COX: When you type in a certain PIN code and press equals, the calculator fades away, and the app reveals itself.

FOUNTAIN: Joseph Cox is the author of a new book called "Dark Wire: The Incredible True Story Of The Largest Sting Operation Ever." And he says the leaders of criminal networks - they loved the calculator thing.

COX: Drug traffickers love gizmos. They love gadgets. And if they have something like, ooh, the app is hidden behind a calculator, they think that's amazing, and they want to buy it.

FOUNTAIN: Once they had their feature-packed phone, Young and the FBI focused on the next challenge - what to charge for the phone.

YOUNG: I vividly remember having discussions about setting the price of it because we didn't want it to be too cheap. I can't remember the economic principle, but it's that people will buy, you know, a luxury item that's...

FOUNTAIN: Ah, Veblen good.

YOUNG: Yes. That one.

FOUNTAIN: A Veblen good is the rare product where as price increases, so does demand. And the FBI decided to signal a premium product by charging a premium price. Their next challenge - how to market the phones. They couldn't advertise them as made by the FBI. Instead, they got the phones, which they called ANOM, into the hands of kingpins who said...

YOUNG: You're not talking to me unless you're using ANOM. And so then all those - the four guys below him get ANOMs, and then they go to their crews and say, well, if you want to talk to me, you've got to be on ANOM.

FOUNTAIN: They gave these kingpins commissions, sometimes even ownership in the company.

YOUNG: I do think, at some point, we had given away more than 100%, but...

FOUNTAIN: (Laughter). That's fraud, Andrew.

YOUNG: Securities fraud. But, you know, it's all right.

FOUNTAIN: To Young, the ends justified the means. According to the authorities, when they finally shut down the operation in 2021, they'd sold 12,000 phones and seized tons of drugs, prevented 150 murders and made hundreds and hundreds of arrests, though none of those arrests were in the U.S. Young never got permission to spy on phones here.

Nick Fountain, NPR News. Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

Nick Fountain produces and reports for Planet Money. Since he joined the team in 2015, he's reported stories on pears, black pepper, ice cream, chicken, and hot dogs (twice). Come to think of it, he reports on food a whole lot. But he's also driven the world's longest yard sale, uncovered the secretive group that controls international mail, and told the story of a crazy patent scheme that involved an acting Attorney General.