Trojan Shield: FBI's California sting nets more than 500 arrests and seizure of drugs, guns and crypto

SAN DIEGO, Calif. - The FBI revealed details on Tuesday in a stunning law enforcement sting that spanned the globe and led to more than 500 people being arrested and the seizure of some 32 tons of drugs, 250 firearms, and nearly $150 million in cash and cryptocurrency, as agents quickly closed in on criminal rings that they had been monitoring for years.

Documents show the FBI's operation "Trojan Shield" dates to 2018 after the FBI took down a Canadian company called Phantom Secure that was providing encrypted devices that could not make calls or connect to the internet but could allow criminals to send messages to other similar devices.

With Phantom Secure disabled, the FBI and Australian authorities stepped in and created a replacement app and encrypted device marketed to criminals.

"For the first time, the FBI developed and operated its own hardened encrypted device company called ANOM," said Randy Grossman, acting U.S. Attorney in San Diego.

At a news conference, an FBI map showed how the ANOM devices quickly gained popularity, with the network expanding to more than 12,000 encrypted devices, sold to more than 300 criminal groups, in more than 100 countries.

"Every single person who used ANOM used it for a criminal purpose," said Grossman.

Nicholas Weaver, a computer science expert and lecturer at UC Berkeley, says the coding for the devices was not the hard part.

"It's a brilliant example of taking advantage of social weaknesses with technical exploitation," said Weaver, "Actually building the cryptography to do this would be something that would be a reasonable homework assignment. Doing the integration needed and the social aspects needed to get this adopted and used by thousands of criminals, running millions of dollars in drugs is the true brilliance of this operation."

Weaver says another aspect of the operation that was brilliant was the careful work to ensure the multi-national sting was legal.

"A third party partner decrypted the messages and only forwarded to the FBI messages that the FBI could legally read without having to obtain a wiretap first," said Weaver.

Experts say the FBI sting shows a new frontier for cybercrime investigations.

"In this case, they got an informant, an insider that was able to write applications that would be trusted by the bad guys," said Herbert Lin, a senior researcher at Stanford University who specializes in cybercrimes.

Lin noted that the FBI paid the insider $120,000 and made a deal for a reduced criminal sentence in exchange for the help with developing the encrypted communication system and distributing the devices.

He says the FBI faces challenges, though, in recruiting talent. There is an inherent danger for criminals who become informants for the government. Plus, Lin says when it comes to hiring computer savvy agents, the FBI is competing for the same people wanted by large corporations that can pay more money.

"If you say I don't want anyone who's ever done anything illegal, whether it's penetrating a computer without authorization or never taking drugs, you're going to cut yourself off from a lot of talent," said Lin.

The FBI's indictment Tuesday named 17 suspects accused of administering and distributing the ANOM devices.

This story was reported from Oakland, Calif. Jana Katsuyama is a reporter for KTVU.  Email Jana at jana.katsuyama@fox.com and follow her on Twitter @JanaKTVU or Facebook @NewsJana or ktvu.com.