Hamas may have made millions by short-selling Israeli investments before its terror attacks

A study finds ‘strong evidence’ that investors who knew Hamas attacks were coming profited through twisted insider trading

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People with advance knowledge of the Oct. 7 terror attacks on Israel by Hamas may have financially profited from the deadly strikes through significant short-selling of shares in Israeli companies, a study says.

“Days before the attack, traders appeared to anticipate the events to come,” says the research paper by U.S. financial law specialists.

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“Our findings offer strong evidence that informed traders profited by anticipating the events of October 7,” according to the unpublished study that notes the specific reasons behind such unusual trading is not known, but suggests twisted insider trading could be a means of terrorist financing or terror profiteering.

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The total profit from such investment activity could amount to close to a billion U.S. dollars, the study says.

In the financial world, selling short is a way of investing in a stock so that profit comes from the value of the stock dropping, rather than the usual approach of buying shares and hoping their value rises.

Many stocks typically have a quick drop at news of explosive world events expected to bring widespread chaos or uncertainty.

Robert Jackson, Jr. and Joshua Mitts studied data from the days leading to the Hamas attacks on a leading exchange-traded fund composed of a broad base of Israeli equities that reflect Israel’s economy, as well as individual Israeli companies listed on stock exchanges in both the United States and Israel.

Jackson, a former commissioner of the U.S. Securities and Exchange Commission, is a professor of law at New York University. Mitts is a law professor at Columbia Law School, also in New York, who is known for using data analysis in research on corporate and securities law.

Their research paper is a pre-print released through the Social Science Research Network, meaning it has not been published in a peer-review journal.

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“On Oct. 2, short interest in the MSCI Israel Exchange Traded Fund (ETF) suddenly, and significantly, spiked. And just before the attack, short selling of Israeli securities on the Tel Aviv Stock Exchange increased dramatically,” the paper says.

Data shows the increase in short selling “is economically and statistically unusual,” the authors say — so much so, almost all reported off-exchange trading volume of the ETF on Oct. 2 was short selling, with another spike immediately before the attack.

It is “extremely unlikely that the volume of short selling on Oct. 2 occurred by random chance … (and likely) was related to the Hamas attack rather than random noise.

“The short selling that day far exceeded the short selling that occurred during numerous other periods of crisis, including the recession following the financial crisis, the 2014 Israel-Gaza war, and the COVID-19 pandemic,” the paper says.

The researchers found a substantial overall increase in short investments in Israeli companies listed on the Tel Aviv Stock Exchange (TASE) which peaked just before the launch of the Oct. 7 attacks.

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The same spike was not as clearly seen for Israeli companies listed on U.S. exchanges, but a rough and preliminary examination shows more interest in a drop in Israel’s economy leading up to the October attacks, the paper says.

The authors suggest the lack of impact on U.S. exchanges could be because many of the large companies are military related, businesses that could be expected to benefit from an attack on Israel, and others have strong international presences with less susceptibility to events inside Israel.

The study data showed that one company, a large Israeli bank called Bank Leumi, had a nearly 50 per cent increase in short activity from Sept. 14 to Oct. 5. The bank’s share price dropped nearly 23 per cent after the attacks, which, on short selling, could yield profits (or avoided losses) of 30 million New Israeli Shekel, which is almost C$11 million.

“In light of the profoundly tragic toll of such attacks,” the paper says of investors having foreknowledge of terror attacks, “society should encourage disclosure of such information rather than trading — that is, prevention of tragedy rather than profit from it.

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“Policymakers should examine the degree to which market activity can provide national-security and intelligence authorities with information about the probability of an attack,” the paper says.

Jessica Davis, a Canadian counterterrorism and intelligence consultant, is cautious about the meaning of the study’s findings.

Davis said Hamas and its supporters “absolutely have the financial sophistication to do this,” but warned that similar findings about previous terrorist attacks have been found to be false, or attributable to other factors other than terrorists shorting for financial profit.

“That seems like a lot of traceable activity for people who were trying to keep an impending terrorist attack quiet,” Davis wrote on X, formerly Twitter.

“I think a more plausible explanation for this activity will be multi-faceted. Will there be some people who shorted the stocks because they knew about the attack? Probably. Will it be in the millions of dollars? Maybe. But this volume? Skeptical.”


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She also said the world’s financial markets are so regulated that it seems likely the identifies of the profiteers will one day be known.

There is a Canadian precedent for a terrorist planning to do exactly what the study’s authors believe Hamas did.

Shareef Abdelhaleem, one of the architects behind the Toronto 18 terror plot, was an avid investor and stock trader before his arrest in 2006 and he said at his parole hearings he aimed to profit by short-selling stocks before the attacks.

He said one of the planned targets for the truck bombs the group was building was the Toronto Stock Exchange and he knew that if successful it would wreck the Canadian economy.

He said this was about his personal greed, though, not as a means to fund more terrorist activities.

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