Did Hamas make millions trading the October 7th attacks?

In the run-up to its assault on Israel on October seventh, Hamas maintained tight operational safety. The timing of the assault blindsided Israel’s military and intelligence companies, and seems to have stunned even a few of Hamas’s political leaders. However, a brand new working paper by Robert Jackson Jr, a former commissioner of America’s Securities and Exchange Commission, and Joshua Mitts of Columbia University suggests that somebody had sufficient advance data of the plan to make a small fortune benefiting from a crash within the Israeli stockmarket.

The authors analysed buying and selling patterns in Israeli shares within the weeks earlier than the assault, and located anomalies in keeping with a grim type of knowledgeable buying and selling. Perhaps essentially the most hanging instance is a surge in brief gross sales—bets {that a} safety’s value will fall—of a comparatively illiquid exchange-traded fund (etf), which is listed on the New York Stock Exchange underneath the ticker eis, and tracks an index of Israeli share costs.

picture: The Economist

In September a mean of 1,581 shares per day of EIS (collectively value $85,000 or so) had been offered brief, representing 17% of the day by day complete buying and selling quantity within the ETF. But on October 2nd, 5 days earlier than the assaults, a whopping 227,820 shares had been shorted, accounting for 99% of EIS’s quantity that day (see chart). Moreover, moderately than reflecting a souring of market sentiment on Israeli equities, your complete improve in exercise seems to have come from two transactions: one sale of fifty,733 shares simply earlier than 3pm, and one other for 174,869 shares 35 minutes later. Whoever made these trades might have made a $1m revenue inside every week, and an extra $1m throughout the next three weeks.

Other securities tied to Israeli shares additionally confirmed suspicious patterns. During the three weeks earlier than the assaults, the variety of excellent choices contracts expiring on October thirteenth on American-traded shares of Israeli companies—the derivatives that may yield the best returns if costs moved sharply within the route a dealer anticipated, and expire nugatory in any other case—rose eightfold. In distinction, the variety of longer-dated choices on such shares, whose worth relied on occasions past mid-October, barely modified.

Could there have been one other trigger? The shorting of airline shares forward of the assaults of September eleventh could have been prompted by forthcoming earnings bulletins. Yet there appears no such different on this case, notes Eric Zitzewitz of Dartmouth College. The paper’s authors examined different latest durations of turmoil in Israel, akin to that prompted by the federal government’s tried judicial reform earlier this 12 months, and didn’t detect related behaviour. The solely match for the anomalies was in early April—two days earlier than the Jewish vacation of Passover, which in response to reporting by Channel 12, an Israeli television station, was the date initially scheduled for Hamas to launch its assault.

The examine has prompted an investigation by Israel’s securities authority. Given the secrecy across the assaults, information is unlikely to have leaked to a short-seller on Wall Street. Unless it was dumb luck, whoever positioned the trades in New York and Tel Aviv was most likely inside Hamas, or shut sufficient to know its navy secrets and techniques. In the previous two months, America has banned only one buying and selling agency for its ties to Hamas—a crypto change in Gaza that was linked to illicit transactions value a mere $2,000. Somebody has managed to tug off a far larger coup. Mr Mitts reckons that the trades he and his co-author have detected are “just the tip of the iceberg”.