There is no photo of Paul Krusky in his high-school yearbook graduating class in Guelph, Ont. But there is a quote attributed to Marcus Aurelius by his name: “A man’s worth is no greater than the worth of his ambitions.”
It’s hard to say what Krusky’s worth is now, biding his time in a French prison, accused of operating an international criminal enterprise. But there is no denying his importance. The Globe’s Joe Castaldo and Alexandra Posadzki report today on how a small-town entrepreneur obsessed with digital privacy became one of the most consequential figures in a multinational crackdown on organized crime – and a central character in a momentous debate pitting privacy against the powers of law enforcement.
In today’s edition
- EncroChat: The story behind the story
- Canadians are riding the stock rally …
- … and investing more in domestic startups
THE SPOTLIGHT
An arrest pits privacy against law enforcement
Illustration by Robert Carter
A quiet life: When Paul Krusky was arrested in 2022, he was living with his wife in the Dominican Republic, in a villa overlooking the sea. There, he kept mostly to himself, taking care of stray dogs and plugging away at various money-making projects: A website, a new kind of fly trap, a turn at online poker.
A business takes off: His most successful and most secretive venture, though, changed the course of his life – a company that promised users of its phones and apps the ultimate form of secrecy: messages that are untraceable, deleted upon request, and not even visible by his company – EncroChat. Billed as “the next level of worry-free secure communications,” the service had amassed more than 60,000 users in just a few years.
An argument at the agora: Authorities now say the vast majority of those users were carrying out criminal activity, but some industry watchers fear a crackdown on a relatively unknown messaging system could give precedent for authorities to conduct similar data surveillance operations into more mainstream services.
The story behind the story
Paul Krusky with a dog named Maggie.Supplied
To tell this story, Castaldo and Posadzki spent months poring over legal documents, tracking down Krusky’s friends and former colleagues around the world, and navigating the relatively new frontier of law enforcement and encryption services. I asked them how the saga unfolded behind the scenes.
Where and when did your reporting on this begin?
Posadzki: Paul Krusky first came onto my radar via a French TV and radio producer named Vincent Hazard, who I was introduced to through a mutual friend. Vincent has been working on the EncroChat story for quite some time and was looking to connect with Canadian journalists to see what he could learn about Krusky, who grew up in Ontario. I was intrigued and asked Joe Castaldo for his thoughts. We had covered the collapse of Canadian cryptoexchange QuadrigaCX together and both enjoy stories about technology and regulation and law enforcement. We both decided this was a story worth pursuing.
What were your biggest challenges in reporting this story?
Castaldo: Oh boy, so many. It seems that Paul Krusky kept a tight circle of friends, so there are not a lot of people who know him well, and even fewer who would talk to us. We hit a lot of dead ends tracking down others who may have been involved in EncroChat, too. One person may have relocated to Dubai, for instance. Equally frustrating was the lack of publicly available court documents in both the Dominican Republic and France, information which is often invaluable for reporting purposes. Even trying to get answers to basic questions from police in the Dominican Republic was fruitless, as we got passed from officer to officer. I have a whole string of unanswered WhatsApp messages to one particular police officer: “Hola señor! Me puedes ayudar?” (”Hello, sir! Can you help me?”)
What do you think the next chapter in this story looks like?
Castaldo: I’m personally fascinated by the larger debate about end-to-end encryption in Europe, and the legalities of the EncroChat hack in the first place. There are pretty divisive opinions on it, and genuine concern about what it all portends. Some academics have argued that it’s not unthinkable that more mainstream services like Signal and Telegram could be subjected to the same kind of bulk data collection.
Posadzki: And I’ll point out that a major group of activists, journalists and tech workers wrote an open letter last year arguing that French police are trying to “criminalize privacy-protecting technologies.” At the same time, companies that offer encrypted messaging services pose real challenges for law enforcement when tackling organized crime – especially if the companies don’t co-operate with investigators. It’s a massive issue and regulators are only now seeing just how much they’ll have to untangle, and how much society is willing to bear.
You can read the full story here.
Investing
Canadians riding the stock rally
The recent stock-market rally is padding the finances of Canadians, Matt Lundy reports. They’ve seen their collective wealth jump to record levels in the early stages of the year.
A big bump: Household net worth rose by nearly $550-billion or 3.3 per cent over the first quarter of 2024, Statistics Canada reported. That brought overall household wealth to $16.9-trillion, surpassing the previous nominal high in early 2022
But: Most wealth is held by relatively few households. For example, in the final quarter of 2023, more than 90 per cent of net worth was held by households that own a home.
Borrowing less: As they contend with higher interest rates, Canadians have also reined in their borrowing. Total liabilities rose by $8.7-billion to start the year, an increase of just 0.3 per cent.
Wealthy feeling healthy about investing domestically
A growing number of wealthy Canadians are backing homegrown startups and the companies that finance them, Sean Silcoff writes.
The portion of high-net-worth individuals and family offices participating in federal government-backed venture capital investment programs has more than doubled, according to the Canadian Venture Capital and Private Equity Association
- From 29.3 per cent in the first program a decade ago to 60 per cent in the third in 2021.
Also on our radar
In finance: Hazelview Investments, a private money manager that specializes in commercial real estate, is halting redemptions on its $1.3-billion Four Quadrant fund for the second time in a year, Tim Kiladze reports.
Behind finance: The Bank for International Settlements has formally opened a research and development centre in Toronto to build financial technology for central banks around the world, Mark Rendell reports. It’s the seventh “innovation hub” launched by the BIS, a Swiss-based organization often referred to as the central bank for central banks.
On finance: Rob Carrick laments the loss of house hunters who used to be able to scrape together enough for a smaller down payment.
Parting thought
For anyone sitting in a prison cell in, say, France: “Nowhere can man find a quieter or more untroubled retreat than in his own soul.”
- Marcus Aurelius, Meditations
Morning markets
Global markets were mostly lower as investors weighed the U.S. interest rate outlook after a week of mixed signals and political turmoil in Europe.
The pan-European STOXX 600 fell 1.1 per cent in morning trading, while France’s CAC 40 was down 2.47 per cent, plunging to its lowest since February. Britain’s FTSE 100 retreated 0.52 per cent and Germany’s DAX declined 1.4 per cent.
In Asia, Japan’s Nikkei closed 0.24 per cent higher at 38,814.56, while Hong Kong’s Hang Seng dropped 0.94 per cent to 38,814.56.
The Canadian dollar traded at 72.69 U.S. cents.