Israel Probes Presumed Insider Trading Prior to Hamas Attack

Israeli officials are conducting an investigation into allegations that certain market participants might have engaged in insider trading before the Hamas-initiated attacks on October 7th. These claims were brought to light by a study conducted by Robert Jackson Jr., a professor at New York University, and Joshua Mitts from Columbia University. Their research spotlighted unusual market activity, specifically a notable increase in short-selling of Israeli stocks just before the violence erupted.

Detailed Findings of the Research

The research paper, which extends over 66 pages, draws attention to the trading patterns leading up to the October 7 attacks. There was a sudden and significant spike in short interest on the MSCI Israel Exchange Traded Fund (ETF) on October 2, according to Financial Industry Regulatory Authority (FINRA) data. The professors observed a drastic uptick in short selling on the Tel Aviv Stock Exchange (TASE) right before the confrontation. Moreover, these transactions were not limited to ordinary short sales; there was also an abnormal surge in the trading of high-risk, short-dated options on Israeli companies that were due to expire shortly after the attack.

The Scope of Potential Profiteering

In the wake of the attacks, the academics' analysis suggests that informed traders could have profited significantly from the unfortunate events. For instance, an additional short-selling of shares in Leumi, Israel's largest bank, reportedly resulted in profits upwards of 3.2 billion shekels (equivalent to approximately $862 million). The researchers also noted that this kind of short-selling activity surpassed that observed during other crisis periods, such as the 2008 financial recession, the 2014 Israel-Gaza conflict, and the COVID-19 pandemic.

Official Response to the Findings

Upon the release of the study's conclusions, the TASE directed inquiries to the Israel Securities Authority, which confirmed the ongoing investigation. While a spokesperson for the regulatory body refrained from providing detailed comments, they acknowledged that the matter is under scrutiny by the appropriate entities. The researchers have underlined the significance of their findings, affirming that such trading practices highlight enforcement gaps in both U.S. and international laws against insider trading.

Israel, Insider, Trading