Researchers can show that several as yet unidentified traders apparently knew about the Hamas attacks on Israel – before they happened.
Instead of warning civilians and trying to save lives, they took the opportunity to short Israeli stocks in the days leading up to the attack – making billions of dollars.
According to the report, Trading and Error, authored by former US Securities and Exchange Commission (SEC) Commissioner Robert J. Jackson Jr. and short-selling researcher Joshua Mitts, the evidence suggests that a number of people knew about the attacks in advance.
“Our findings suggest that traders informed about the coming attacks profited from these tragic events”, they write.
They go on to explain that for a single Israeli company, 4.43 million new shares were sold in a very short time before the attacks – resulting in profits (or approximate avoided losses) of millions of dollars.
“Although we see no aggregate increase in shorting of Israeli companies on U.S. exchanges, we do identify a sharp and unusual increase, just before the attacks, in trading in risky short-dated options on these companies expiring just after the attacks. We identify similar patterns in the Israeli ETF at times when it was reported that Hamas was planning to execute a similar attack as in October”, the researchers say.
Blanks on Wall Street
“Hamas’ attack on Israel on October 7 caught the Israeli army unprepared. But somebody seemingly knew in advance and made billions betting against Israeli shares traded locally and on Wall Street five days before the attack”, notes the Israeli newspaper Haaretz, pointing out that an Israel fund on Wall Street was also shorted just before the attacks.
The players who apparently knew about the attacks in advance and made billions of dollars from them have not yet been identified. However, it is already clear that Israeli officials have known about the impending Hamas attack for over a year.
According to official reports, Hamas’ attack plans were “dismissed” because the Israeli authorities did not believe that the Palestinian Islamist group was actually capable of carrying out such an operation.
Selling a stock short basically means speculating that the value of the stock will decline. The process of short selling a stock usually involves several steps:
1. Borrow the shares: To short a stock, you must first borrow the shares from someone else, usually through a broker.
2. Sell the shares: After borrowing the shares, you sell them on the open market at the current market price.
3. Buy the stock back at a lower price: You then wait, hoping that the price of the stock will go down. If it does, you can buy back the same number of shares at the lower price.
4. Return the shares: Finally, you return the repurchased shares to the party you borrowed them from (your broker).
5. Profit: The difference between the price at which you sold the shares and the lower price at which you bought them back is your profit.