New research that looks at trading in the days before the Oct. 7 Hamas attack in Israel, in which at least 1,200 were killed, is raising suspicions on exactly who knew what before the assault. The 66-page paper published by NYU law professor Robert Jackson Jr. and Columbia law professor Joshua Mitts in the SSRN journal, titled "Trading on Terror?," unearths a "significant short-selling of shares" of Israeli-linked companies in the days before the attack, per Reuters. Short selling involves borrowing shares and selling them, expecting their decline so that they can then be purchased back for a lot less money.
Those bets against the MSCI Israel ETF (exchange-traded fund) "far exceeded" similar activity seen during other tumultuous times, including during the financial crisis in the late aughts, the COVID pandemic, and the Israel-Gaza war in 2014. As one example, the researchers cite Leumi, Israel's largest bank, where more than 4.4 million shares were sold short between Sept. 14 and Oct. 5, bringing in profits of $862 million. "Our findings suggest that traders informed about the coming attacks profited from these tragic events," the law professors write in the preliminary research, which CNN Business notes has not yet been peer reviewed.
Mitts tells CNN that he thinks what he and Jackson uncovered is only "the tip of the iceberg," as public trading data is so restricted, though he stresses that the trading can't be tied definitively back to Hamas; he notes that someone may have simply "overheard something." He adds, "There is a lot more out there that we can't pick up on but that regulators should be looking at." Yale law professor Jonathan Macey calls the report "shocking." "The evidence that informed traders profited by anticipating the terrorist attack of October 7 is strong," he notes. The Israel Securities Authority isn't saying much, though it has acknowledged it's looking into the report. "The matter is known to the authority and is under investigation by all the relevant parties," the regulator tells Reuters. (More Israel-Hamas war stories.)