Overwhelming proof of Insider trading in anticipation of Oct 7

 

Washington Post

NEW YORK—Some investors active on the New York and Tel Aviv Stock Exchanges (NYSE and TASE) apparently knew in advance that Hamas militants were about to launch their attack on Israel before Oct. 7th and that a war would follow. They used that knowledge to cash in by short-selling Israel-linked shares, generating a profit windfall worth millions of dollars.

That’s the claim being made by researchers at New York University and Columbia University. “Our evidence is consistent with informed traders anticipating and profiting from the Hamas attack” and the war that erupted in its wake, financial market experts Robert J. Jackson, Jr., of NYU and Joshua Mitts of Columbia concluded in an explosive paper published Dec. 4.

The two professors’ meticulously-documented report, titled “Trading on Terror?”, details what they call a “significant spike in short-selling in the principal Israeli-company ETF [Exchange-Traded Fund]” on the NYSE in the weeks before Oct. 7th and similar short-selling moves against dozens of Israeli companies listed on the TASE. They rely on data from the Financial Industry Regulatory Authority (FINRA), which they say is still incomplete.

Short-selling the Israeli economy

The practice of short-selling is a bet by traders that a company’s stock price will go down in the near future. For a small fee, short-sellers “borrow” shares of a corporation or fund that they believe will soon drop.

While the price is still up, they sell the borrowed shares. Then, when the price drops, the short-sellers “close their position,” meaning they re-buy the shares and return them to the broker they borrowed them from, pocketing the difference and potentially making huge profits.

Typically, short-sellers make such bets because they disagree with analyst consensus about a particular company’s financial health. Sometimes, however, it’s because they have insider knowledge about events that will impact a company’s business before they happen.

According to the research published in “Trading on Terror,” that is exactly what seems to have happened in relation to Oct. 7th. “Days before the attack, traders appeared to anticipate the events to come,” Jackson and Mitts declared.

Citing trading activity in New York, they said the main exchange-traded fund that broadly tracks the performance of the Israeli stock market as a whole “suddenly and significantly spiked” on Oct. 2—five days before the attacks.

Looking at the volume of short-sells of MSCI Israel ETF (stock code: EIS), they say it was “extraordinarily high and unlikely to have been explained by bona fide market making” because there were no purchases to offset sales. The trading was all in one direction: “Nearly 100% of the trading volume in EIS…consisted of short-selling.”