Share this @internewscast.com

It’s a dramatic and troubling claim: Two New York law professors, one of them a former commissioner of the Securities and Exchange Commission, say that bets were made against Israeli stocks in October and made millions after Hamas attacked Israel.

The allegations in the Social Science Research Network journal haven’t been peer-reviewed yet. But they attracted a lot of attention, partly because — as the authors acknowledge in their paper — there is no way to know if the trades were made by people connected to Hamas or people connected to Israel or neither.

The paper itself is a preliminary draft, written by Robert J. Jackson Jr., who was an SEC commissioner from 2018 to 2020 and is now a professor at New York University School of Law, and Joshua Mitts, a professor at Columbia Law School.

“Our findings suggest that traders informed about the coming attacks profited from these tragic events,” they wrote, referring to the attacks of Oct. 7.

The day after the attacks, Israel’s main stock exchange fell 8%.

But based on the data that is available to researchers and the public, it’s hard to say if it happened the way they theorized.

“There is not enough hard evidence to say definitively what happened,” said J.J. Kinahan, who has been involved with options trading since 1985. He is the the CEO of IG North America, which has an options trading business called Tastytrade.

“Without hard evidence of a brokerage statement or hard evidence of a trade, it’s hard to say ‘this happened,’” he said.

Israel’s stock exchange has rejected the claims that there was unusual trading activity before Hamas’ attacks. About 1,200 people in Israel died, and more than 200 were taken hostage, according to Israeli officials. The subsequent war has killed more than 17,000 Palestinians in the Gaza Strip, according to health officials there.

In terms of the initial attention and speculation the paper received, it did not help that in an earlier version of the report, the authors overstated the profits of one trade by a factor of 100. They mistook the Israeli equivalent of cents, or agorot, for dollars, or shekels, and said that these unknown parties may have made around $860 million in profit from a single short position against a large Israeli bank. With that error corrected, the actual profit would have been $8.6 million.

Jackson and Mills wrote that beginning in early October, some traders started betting that Israeli stocks were going to fall. They did that by taking short positions, stock market trades in which a person or company borrows a stock from someone else and then sells it. If the price of that asset falls below the sale price, they can then buy it back for a profit.

For example, Jackson and Mitts said, that on Oct. 2, there was an unusual increase in shorts taken out against the MSCI Israel Exchange-Traded Fund, a collection of 117 different Israeli stocks that traders can buy or sell the same way they could an individual stock.

“We document a significant spike in short selling in the principal Israeli-company ETF days before the October 7 Hamas attack,” they wrote.

The professors say that these bets were unusual given the context of Israel’s economy at the time. And they added that these unknown traders were taking bigger risks in the early days of October, which could mean they were more confident a big decline was coming.

Kinahan said it’s hard to know if that’s really what the traders were expecting. One reason is that traders often use options to hedge their market bets.

It might look sinister that someone shorted some Israeli stocks days before Hamas attacked, but Kinahan said it’s just as possible the traders actually made a far larger bet that Israel’s economy would thrive and hedged that bet by shorting some stocks and the MSCI ETF. That’s a common strategy used to mitigate potential losses.

“There could be a stock trade that this is the other side of,” he said.

It’s a limitation the authors acknowledged in the paper. Still, according to Mitts and Jackson, their research shows that short selling of Israeli stocks on the Tel Aviv Stock Exchange and shorting of Israel stocks in the United States also increased dramatically before the attacks.

News reports said that Hamas initially planned to attack Israel in early April, and the authors said they have found signs of similar shorting actions at that time. They said that could show that someone was prepared to implement the same trading strategy.

Yaniv Pagot, head of trading at the Tel Aviv Stock Exchange, said the authors did not understand the Israeli market.

“This is a flawed analysis from the outset and there is a lack of understanding of how the local market operates. It is unfortunate that the researchers did not check with Israeli stock exchange members, they could have asked how these things work in the country,” he said in a statement emailed to NBC News.

Kinahan also told NBC that while some stocks were shorted at greater than usual levels compared to typical trading, most of the stocks themselves are lightly traded. That means fluctuations in those stocks can look bigger than they really are.

The SEC told NBC News that it doesn’t comment on the existence or nonexistence of investigations, and the Financial Industry Regulatory Authority declined to comment.

In the aftermath of the terrorist attacks of Sept. 11, 2001, there were theories that someone connected to Al Qaeda shorted airlines and other stocks that suffered especially large declines once U.S. markets reopened six days after the attacks. The SEC spent almost three years looking into the matter, and said in 2004 that it “did not develop any evidence suggesting that anyone who had advance knowledge of the September 11 attacks traded on the basis of that information.”

For example, one trader who bet that United Airlines stock would fall turned out to have made a large corresponding bet that American Airlines would rise. Other suspicious trades on Sept. 10, 2001, were linked to a newsletter that had been faxed to subscribers the day before.


Share this @internewscast.com
You May Also Like
Fury over Dictionary.com's Word Of The Year: '6 7'

Controversy Erupts as Dictionary.com Announces ‘6 7’ as Word of the Year

Dictionary.com has revealed its Word of the Year, and it’s likely not…
Sudan's paramilitary forces killed hundreds at a hospital in Darfur, residents and aid workers say

Devastating Darfur Hospital Massacre: Hundreds Killed by Sudan’s Paramilitary Forces

Sudan’s paramilitary forces have reportedly committed a tragic massacre at a hospital,…
Patients go without needed treatment after the government shutdown disrupts a telehealth program

Government Shutdown Halts Telehealth Services, Leaving Patients Without Essential Care

MINOOKA, Ill. (AP) — Bill Swick is living with a rare degenerative…
Jury convicts California activist who took chickens from Perdue Farms plant

California Activist Found Guilty in Bold Rescue of Chickens from Perdue Farms

In SAN FRANCISCO (AP), a California-based advocate for animal rights, Zoe Rosenberg,…
President Donald Trump cuts tariffs on China after meeting Xi in South Korea

President Trump Reduces Tariffs on China Following Meeting with President Xi in South Korea

President Donald Trump hailed his recent encounter with Chinese President Xi Jinping…
US will share tech to let South Korea build a nuclear-powered submarine, Trump says

Trump Announces US-South Korea Partnership for Nuclear Submarine Technology Transfer

In a significant development, President Donald Trump announced via social media that…
Hoffman Estates Timber Trails Elementary School teacher Katie Pappas gets 2nd life-saving kidney transplant organ donation

Local Teacher at Timber Trails Elementary Receives Second Life-Saving Kidney Transplant

A heartwarming celebration unfolded in Hoffman Estates as a local school teacher…
5 more arrested in connection with Louvre heist, jewels worth $102M still missing

Five More Arrested in Ongoing Louvre Heist Investigation: Search Continues for $102M in Stolen Jewels

In a significant breakthrough in the investigation into the audacious daytime robbery…
Navy Pier lawsuit: Kira Bond of New York seriously injured by s'mores fire sues Offshore Rooftop restaurant in Chicago

New York Woman Files Lawsuit Against Chicago Restaurant After S’mores Mishap at Navy Pier

A fire at the Offshore Rooftop restaurant located at Navy Pier in…
Chicago immigration operations: Appeals court blocks order requiring CBP Chief Greg Bovino to meet with judge every day on

Appeals Court Halts Daily Meetings Between CBP Chief and Judge in Chicago Immigration Case

The U.S. Department of Justice has lodged an appeal against a federal…
Older residents make up slim majority at the polls halfway through early voting in NYC mayoral race

Older Voters Lead Early Turnout in NYC Mayoral Race’s Midway Point

Midway through the early voting period, senior citizens in New York City…
Beach bliss turns chaotic as shark lunges at snorkeler: 'He could have ripped my arm off'

Heart-Stopping Beach Drama: Snorkeler’s Narrow Escape from Shark Attack

A Florida resident is currently on the mend following a shark attack…