Yamaguchi, an old friend of Togusa's and a police detective working in the Laughing Man task force, is murdered after he calls Togusa, requesting to see him concerning what Yamaguchi terms "suspicious internal activity" by superiors in the police department. At Yamaguchi's wake, Togusa is approached by Yamaguchi's wife, who delivers an envelope from him to Togusa that contain a series of strange photographs. Upon scrutinizing the photographs, Togusa realizes that none of them are taken using a camera. Continuing his investigation, Togusa interviews another detective in the Laughing Man task force, who coincidentally mentions that the task force is waiting to bug a primary suspect in the case with cybernetic surveillance devices called "interceptors". The interceptors allow constant audio and visual monitoring of the subject via their own senses. Togusa concludes that the Laughing Man task force members were bugged with these devices illegally for monitoring. Shortly thereafter, the information about the illegal use of the interceptors is leaked by Section 9, prompting the police Commissioner to call a press conference regarding the growing scandal. The Commissioner publicly denies any responsibility, instead blaming the head of the "Laughing Man" task force, Kunihiko Nibu, and announcing Nibu's immediate resignation. News reporters press the Commissioner about the possible involvement of higher officials, as well as the Commissioner's own ties to nanomachine maker Serano Genomics, Inc., who manufactured the interceptors, but the Commissioner continues in his denials. At that point, the hacker known as the Laughing Man returns. Hijacking a police official's cyberbrain, the Laughing Man denounces what he refers to as the "previous farce", and announces that due to the police's efforts to cover up the truth, he will reluctantly challenge them again. Finally, he delivers a death threat to the commissioner, stating that he will "remove" him if the truth is not revealed in full. This episode has a small tribute to the movie Blade Runner.

A heavy-assault multi-ped tank runs amok, under the control of an unknown hijacker using the "recognition code" of the tank's designer, Takeshi Kago, who died a week earlier. After going on a destructive spree at the testing facility, the tank heads towards the urban area of Niihama. Section 9 is called in to stop the tank, as no terrorist group has claimed responsibility, and the JSDF refuses to involve itself unless terrorism is the clear motive. Saito attempts to snipe the tank, but is thwarted due to the tank's capability to link into the same satellite Saito is using to aim. Meanwhile, Togusa and Ishikawa interview the tank's co-designer, Toshio Ooba. After some questioning by Togusa, Ooba reveals the identity of the tank's hijacker: Takeshi Kago, the original designer. After Kago's death, Ooba linked Kago's brain to the tank's AI, effectively putting Kago in complete control of the tank. Ooba further reveals that Kago's possible motive may be to avenge himself upon his parents; he had serious medical problems, but his parents refused to allow him to get a cyberbody or even a cyberbrain due to their religious beliefs. Kago's destination is his parents home, and Section 9 tries to stop him before he gets there. They are unsuccessful, and Section 9 is forced to battle Kago; in the end, they disable the tank and Kusanagi short-circuits Kago's brain. However, the Major discovers a split second before she does so that all Kago was trying to do was show his parents his new steel body.