According to a report published on Monday by US researchers, some traders may have been notified of Hamas’s plan to strike Israel on October 7 and utilised that knowledge to make millions of dollars by short-selling Israeli equities.
Law professors Robert Jackson Jr. of New York University and Joshua Mitts of Columbia University investigated trading in exchange-traded funds that invest in Israeli firms, as well as short-selling activity on the Tel Aviv Stock Exchange (TASE) and options activity on Israeli firms traded on US exchanges.
The goal of short-selling is to benefit from an asset whose price is projected to fall. The seller “borrows” a security and sells it on the open market with the intention of repurchasing it later at a cheaper price.
Researchers found significant short-selling of shares leading up to the attacks that triggered the Israel-Hamas war.
“Days before the attack, traders appeared to anticipate the events to come,” they wrote, citing short interest in the Israel Exchange Traded Fund (ETF) that “suddenly, and significantly, spiked” on October 2 based on data from the Financial Industry Regulatory Authority (FINRA).
The ETF is commonly used as a way for people to make investments in Israel, which on any given day has around 2,000 shares shorted. On October 2, that number shot up to over 227,000 shares, the study revealed.
“Short-selling of Israeli securities on the Tel Aviv Stock Exchange (TASE) increased dramatically just before the attack,” the professors said in their 66-page report.
“That’s extremely unusual,” said Mitts, one of the study’s authors, adding that shorting shares in one Israeli business alone resulted in a profit of roughly $900,000.
Another confirmed example is the sale of 4.43 million shares of Leumi, Israel’s largest bank, for a profit of 3.2 billion shekels ($862 million) between September 14 and October 5. In the immediate wake of the incident, Leumi’s share price fell by about 9% on October 8.
“Taken together, our evidence is consistent with informed traders anticipating and profiting from the Hamas attack,” the authors of the study said.
