Israel Probing Claim Traders Knew in Advance of Oct. 7 Attack

“Our findings suggest that traders informed about the coming attacks profited from these tragic events.”

JNS 4 December 2023

Tel Aviv Stock Exchange. Credit: Yaniv Morozovsky via Wikimedia Commons.

Israeli authorities are investigating a claim by two researchers in the United States that traders possibly knew in advance about the Hamas attack of Oct. 7 and profited from the massacre.

The report by law professors Robert J. Jackson Jr. of New York University School of Law (NYU Law) and Joshua Mitts of Columbia Law School found a sharp rise in short-selling of Israeli stocks in the weeks leading up to the attack, in which thousands of Hamas gunmen stormed the border, murdering 1,200 people, wounding more than 5,000 and taking 240 hostages back to the Gaza Strip.

“Days before the attack, traders appeared to anticipate the events to come,” they wrote in a 66-page report. They cited a sudden and significant spike in short interest in the MSCI Israel Exchange Traded Fund (ETF) on Oct. 2 based on data from the Financial Industry Regulatory Authority (FINRA).

“And just before the attack, short selling of Israeli securities on the Tel Aviv Stock Exchange (TASE) increased dramatically.”

The Israel Securities Authority told Reuters that “the matter is known to the authority and is under investigation by all the relevant parties.”

The researchers wrote: “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.

“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 U.S. and international enforcement of legal prohibitions on informed trading,” they added.

According to the researchers, the findings show that the short sales were larger than in the days before previous rounds of fighting between Israel and terrorists in Gaza, as well as before the outbreak of COVID-19.

They also referred to similar patterns in April when it was reported that Hamas initially planned the attack on Israel.

 “Short volume in EIS [the MSCI Israel ETF] peaked on April 3 at levels very similar to those observed on Oct. 2 and was far higher by an order of magnitude than other days prior to April 3,” they said.

 

December 5, 2023 | 7 Comments »

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  1. Israeli authorities are investigating a claim by two researchers in the United States that traders possibly knew in advance about the Hamas attack of Oct. 7 and profited from the massacre.

    I recall these exact same claims made after 9/11/. Just more conspiracy theory nonsense.

  2. It would be quite a bold move by the terrorists or their associates to have used their killings in Otef to make a killing on the markets, particularly focusing upon Leumi Bank whose history is tied to the Zionist movement going back over a century.

    However, changes in the banking and trading systems following 9/11 made the use of these systems very difficult for use by the terrorists, and the anonymity associated with blockchain systems has become far more useful for them, which is why blockchain investments have maintained the focus of such investigations. This was hardly unknown to the authors of this study, both of whom are very well credentialed, but what does seem to have been unknown to them is the details of the trading was reported in agorot. It seems this too should have been easy enough for them to have known, but it seems that it was not. This gross error however does not erase the trend which they exposed, but it does completely change the nature of the trend.

    Rather than shorts spiking just prior to the Simchat Torah Attack, per the reports shared below, there was a rising trend taking place since July. This is coincident with the Leftists assault on the Israeli markets and economy, making the revelation more reasonably explained. Also the drop in short sales taking place in the weeks following the war seems to be due to the changes in the post-attack outlook of the market and the ready availability of the shares being elevated, which would makes the repurchase of the shares (this is how the short transaction is completed, just fyi) more affordable.

  3. [Tel Aviv Stock Exchange EVP head of trade Yaniv] Pagot said to Globes, “What the researchers did in the study was to assume through lack of familiarity with the local market that share prices in Israel are quoted in shekels rather than agorot (100 agorot equals a shekel). From this there were many mistakes. In the research they took the increase in the short sales balance on 4,500,000 shares. The researchers estimated that the price per share fell from NIS 734 instead of 734 agorot or NIS 7.34. Therefore they calculate a profit of NIS 3.2 billion (in Leumi shares) when in practice the profit was only NIS 32 million [$8.6mn]. The researchers magnified the loss per share 100 times. This is a fundamentally mistaken assumption.”

    Pagot also said: “There is also a lack of understanding of what happens on the capital market in Tel Aviv. If we assume that somebody carried out a huge short sale in a share, whoever made such a short sell would be completely transparent to the local regulator because he has to sign a share lending agreement with a TASE member. So would somebody from Hamas or a straw company acting on their behalf sign a share lending agreement on the TASE? Even if somebody wants to borrow shares worth NIS 500 million, they need to identify themselves to a bank and take out a credit framework. So the bank need information on who is involved. There are matters like money laundering etc. In other words, there could not be such a scenario. It is regrettable that the researchers did not check with Israeli TASE members and they could have asked how these things work in Israel.”

    Globes’ examination of TASE data does find that there was a consistent rise in short trading balances on Bank Leumi shares prior to the outbreak of the war. On July 26 there was NIS 285 million in short trade balances on Bank Leumi, which has climbed to NIS 407 million by the last week of September and NIS 422 million on October 5. By November 2, almost a month after the start of the war, the short trade balances on Leumi’s share had fallen to NIS 371 million, and fell further to NIS 355 million on November 23. The rise in short positions ahead of the outbreak of the war and the fall after the start of the war, shed additional light on the matter.

    https://finadium.com/researchers-scrutinize-short-selling-on-tel-aviv-bourse-before-hamas-attack/

    In terms of trading, Bank Leumi’s share price tanked after the outbreak of the war. On Sunday October 8, all TASE indices fell sharply. By October 23 Leumi’s share price had fallen 22% in 12 trading days from the start of the war, with NIS 6.5 billion shaved off its market cap, which had fallen to NIS 37 billion. Since then Leumi’s share price has recovered and as of this morning had gained 16% since October 23, with a market cap of NIS 43 billion.

    The choice, to the extent that it was indeed made by the short traders, of Bank Leumi shares was apparently made mainly due to the high liquidity of the shares. When the shares are traded in large volumes, it is possible to receive more offers to short the share, thus building more significant positions.

    https://en.globes.co.il/en/article-huge-errors-in-us-study-about-tase-short-sellers-1001464098

  4. Interesting… I’ve been telling anyone who’s interested (not many) that the huge anti-Netanyahu marches in Israel were the distraction that ultimately led to the Oct 7 massacre…
    Now Linda Goudsmit has said essentially the same thing and for what it’s worth I feel vindicated. But what does Israel do next? It seems that until now these people have been tolerated (I had an ugly encounter with one in the hotel restaurant in Tel Aviv a few years ago) but this tolerance seems to have blinded people to their maliciousness. And of course the fact that they have lots of power in Israel makes no difference to those who display their “morality” by marching, as leftists on behalf of Hamas… Even some of our Jewish bretheren in Canada.

  5. This is not surprising for those who recognize the savage October 7 Hamas attack was an inside job, an attempted coup by Israel’s leftist politicians, leftist judiciary, leftist security forces, and leftist military to oust Netanyahu from power. The far-left in Israel, as in the United States, is allied with the globalist elite who profit from war, instability, and who seek to impose a planetary globalist Unistate. In this case, Hamas went too far, particularly in the brutality of the sexual violence committed during the attack. Instead of ousting Netanyahu, the barbarity of the attack unified Israel under Netanyahu’s leadership and determination to end Hamas.

    Sexual violence is terrorism, and the Biden/Obama regime is complicit in this horrific assault by demanding Israel’s retreat. Blinken’s Orwellian demand that Israel follow rules of engagement is absolutely stupefying! Terrorism is not military warfare that follows rules of engagement. Terrorism DELIBERATELY targets civilians, and Israel has every right and responsibility to protect Israeli civilians from the savagery and brutality of terrorists!!!!

    Hamas intentionally transformed civilian hospitals, schools, homes, mosques, and UN facilities into military targets by intentionally using them as headquarters, ammunition storage facilities, and tunnel access. Hamas is responsible for every civilian casualty in any place where Hamas uses civilians as shields. Period! The United States is demanding Israel fight terrorists as if they are a legitimate military force that follows rules of engagement! Israel has the right to exist and the right to fight this war to win. The United States does not have “credit” to demand Israeli suicide.