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Traders with prior knowledge of Hamas attacks made millions shorting Israel, claims report

The Israeli stock exchange in Tel Aviv
The Israeli stock exchange in Tel Aviv - Kobi Wolf/Bloomberg

Investors with prior knowledge of the Oct 7 Hamas massacre earned at least tens of millions of pounds short-selling Israeli stocks in the days before, according to a report.

Traders with potential links to Hamas put huge bets against the Israeli economy in the run-up to the attack and could have made more than $100 million (£79.3 million), said the 60-page study by Robert Jackson Jr, of New York University School of Law, and Joshua Mitts, of Columbia Law School.

While the report did not name the investors, the report said they were understood to be “informed traders anticipating and profiting from the Hamas attack”.

Mr Mitts told The Telegraph: “It’s not inconceivable that the profits are above $100 million based on the inferences from the current evidence.”

The shorts were unusual as they occurred during the Jewish holiday of Sukkot, a very quiet period in Israel both in terms of news events and financial activity.

The report also noted similar shorting behaviour around Passover in early April, when a similar attack was being planned but then called off at the last minute, according to confessions by Hamas attackers captured by Israel.

Israeli financial authorities said they had launched an investigation into the report, which also noted suspicious trading activity on the US stock exchange shortly before the massacre.

Short selling

Short selling involves borrowing shares and selling them in the hope the share price falls. Investors aim to buy them back at a cheaper price, pocketing the difference.

“Days before the attack, traders appeared to anticipate the events to come,” wrote the report’s authors.

They noted that interest in shorting the MSCI Israel Exchange Traded Fund “suddenly, and significantly, spiked” on Oct 2, according to data from the Financial Industry Regulatory Authority (Finra).

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

The report said the level of shorting that took place as Oct 7 approached was on a far larger scale than during previous crises faced by Israel – including the Covid pandemic and the 2014 Gaza war. It was in the top one per cent of all transactions since 2009.

In the case of Leumi, Israel’s largest bank, unknown investors shorted 4.43 million new shares between Sep 15 and Oct 5, which yielded a profit of around £6 million.

There was also some unusual, “risky” trading activity on US stock exchanges before the attack happened, according to the report’s authors.

“Although we see no aggregate increase in shorting of Israeli companies on US 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,” the report’s authors said.

“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.”

‘Under investigation’

In response to the report, a Tel Aviv Stock Exchange spokesman said: “The matter is known to the authority and is under investigation by all the relevant parties.”

It was not immediately confirmed whether the trades were carried out by Hamas or one of its affiliates. The Islamist group has a political office in Doha in addition to its presence in the Gaza Strip.

Sophisticated investors who short-sell securities often have vast networks of geopolitical and market information at their disposal to help guide their investment decisions.

A car at the Supernova Music Festival is left abandoned following the attack
A car at the Supernova Music Festival is left abandoned following the attack - Leon Neal

In October, it was revealed that Hamas received hundreds of millions of pounds’ worth of cryptocurrencies a few months before Oct 7, possibly to help fund and prepare for the attack.

Israel has in the past moved to shut down Hamas cryptocurrency accounts, such as the 2021 seizure of a series of Bitcoin and Dogecoin e-wallets linked to the group.

A Finra spokesman said: “Finra’s mission is to protect investors and promote market integrity. In line with that mission, Finra monitors the market for unusual trading activity, as part of our normal course of action.

“Finra does not comment on whether or not it is investigating a particular matter.”

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