Confessed Spy Convicted of Exporting U.S. Crypto Gear to China

A Chinese national was convicted this week of smuggling and other charges over his efforts to acquire sensitive military and NSA-encryption gear from eBay and other internet sources.

Chi Tong Kuok, of Macau, told Defense Department and Customs investigators that he had been "acting at the direction of officials for the People's Republic of China," according to a government affidavit in the case. "Kuok indicated he and PRC officials sought the items to figure out ways to listen to or monitor U.S. government and military communications."

Kuok was arrested at the Atlanta International Airport last year en route from Paris to Panama, where he planned to meet an undercover federal agent he believed was going to provide him with military radios. He was transferred to California and indicted (.pdf) for money laundering, conspiracy, smuggling and one count of attempting to export a defense article without a license. On Tuesday, a jury convicted him on all counts.

The U.S. began investigating Kuok in December 2006, when, using the first of many aliases, the man e-mailed a contact in the defense industry in search of software for a VDC-300 airborne data controller, used for secure satellite communications from American military aircraft.

The contact referred Kuok to an undercover agent in San Diego, who began negotiating with Kuok over a shopping list of military technology that eventually grew to at least 43 different items, ranging from a GPS receiver with anti-spoofing defenses, to the NSA-developed AN/CYZ-10 crypto key management device.

Kuok repeatedly expressed fears that he might be dealing with an NSA, CIA or FBI agent, but continued to negotiate with the undercover officer, even cautioning him to avoid referencing the items by model number in e-mail, because "your country has this system to analyze" e-mail for keywords.

Last March, the government says, a genuine U.S. source sold Kuok two export-restricted PRC-148 handheld digital military radios for $8,000, shipping them to Kuok's address in Macau, and accepting payment over Western Union.

Using a Yahoo e-mail address and a different name, Kuok also allegedly contacted an Arizona company this year that had posted on eBay a KG-175 TACLANE - an NSA designed encryption device used to communicate with classified military computer networks, such as the Defense Department's SIPRNet.

It's legal to own the equipment, which can't access anything without the proper crypto key, but export is tightly restricted. The Arizona company initially refused to ship the NSA gear to Macau, but at the government's request, later allowed another undercover agent to negotiate a deal with Kuok while posing as a company official.

"In subsequent e-mails, Kuok indicated he was interested in buying the KG-175 if it came with a particular key," reads an affidavit by John Helsing of the Defense Criminal Investigative Service, who does not elaborate. Kuok allegedly sent the undercover agent $1,700 by Western Union for the crypto device, and then forwarded a list of additional items he wanted. "I am also thinking about if you are FBI or something like that," Kuok allegedly wrote in an e-mail.

Despite his misgivings, Kuok sent the agent another $10,000 for more PRC-148 radios. "When you send the radios, remove all label and write it as vintage walkie talkie, thank you," he allegedly instructed.

The undercover agent and Kuok agreed to meet in Panama to complete the delivery. Unfortunately for Kuok, his plane stopped in Atlanta, where he was arrested and held without bail. Investigators reviewed Kuok's eBay and PayPal accounts and determined he had successfully purchased other export-controlled items online, beginning in 2005.

The government obtained search warrants for two USB flash drives, a laptop computer and several cell phones Kuok had in his carry-on bag, as well as for a cell phone SIM card in his possession.

"Kuok claimed in his post-arrest interview that his PRC ‘handlers(s)' gave him a SIM card and instructed him to place it in his phone once he landed in Panama," wrote Helsing in his affidavit.


Confessed Spy Convicted of Exporting U.S. Crypto Gear to ChinaWired.com has been expanding the hive mind with technology, science and geek culture news since 1995.