Trading on Terror? Israel Investigates Claims Some Traders Knew Hamas' Attack Plan and Profited off It
By Jace Dela Cruz
Dec 06, 2023 02:02 AM EST
Dec 06, 2023 02:02 AM EST
Authorities in Israel are currently investigating unusual trading activities that occurred just days before October 7, when Hamas launched an attack.
Researchers from the United States have presented a preliminary report suggesting a notable increase in market trades just days before Hamas militants attacked Israel and killed more than 1,200 people. The report also suggests that investors betting against the Israeli economy may have made large amounts of money.
Law professors Robert Jackson Jr. from New York University and Joshua Mitts of Columbia University conducted the study, asserting that unknown traders may have had advance knowledge about Hamas' plan to attack Israel and used this information to trade on the Tel Aviv and US stock exchanges.
"Our findings suggest that traders informed about the coming attacks profited from these tragic events," the researchers claimed in their 66-page report.
BBC reported that they cited an increase in short-selling activity in the MSCI Israel Exchange Traded Fund (ETF) in the days leading up to the October 7 event. Citing the data of the US financial watchdog, the Financial Industry Regulatory Authority, the researchers noted that short-selling activity in the ETF "suddenly, and significantly, spiked" on October 2.
They argued that this elevated level of short-selling exceeded what was observed during numerous periods of other crises, including the 2008 global financial crisis, the 2014 Israel-Gaza war, and the COVID-19 pandemic.
Euronews reported that the researchers further claimed that similar transactions also increased on shares of several Israeli companies on the Tel Aviv Stock Exchange in the days leading up to the Hamas attack.
Around 4.43 million new shares in Leumi, Israel's largest bank, were reportedly short-sold between September 14 and October 5, resulting in substantial profits of 3.2 billion shekels ($862 million).
While there was no aggregate increase in the shorting of Israeli firms on US exchanges, the researchers identified an unusual and sharp rise in trading of risky short-dated options on these companies just days before the attacks.
Similar patterns were observed in the Israeli ETF during periods when it was reported that Hamas was planning a similar attack.
"Our findings suggest that traders informed about the coming attacks profited from these tragic events, and consistent with prior literature we show that trading of this kind occurs in gaps in US and international enforcement of legal prohibitions on informed trading," the researchers noted.
The study's findings were published at SSRN. According to Reuters, the Israel Securities Authority is aware of the matter and that "all relevant parties" are investigating it.
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