Insider trading in war? Israel starts investigation in short-selling bets made by investors just before Hamas attack
Produced by: Tarun Mishra Designed by: Manoj Kumar
Allegations of Insider Trading
Israeli authorities are currently investigating allegations raised by US researchers regarding potential insider trading ahead of the Hamas attack on Israel.
Researchers Identify Suspicious Trading Patterns
According to a report by British news publication, The Guardian, Law professors Robert Jackson Jr and Joshua Mitts conducted research pointing to significant short-selling activities leading up to the October 7 attack, suggesting that certain investors knew about the attack before it happened.
Short-Selling Strategy Explained
Short-sellers engage in a strategy where they borrow and sell shares, anticipating a price drop to buy them back later at a lower cost and profit from the difference.
Traders Anticipated Attack Events
Days before the attack, there was a surge in short-selling of an exchange-traded fund mirroring the Israeli stock exchange's performance, indicating potential anticipation of the impending events.
Short-Selling of Israeli Securities
The researchers observed a substantial and sudden rise in short-selling of Israeli securities on the Tel Aviv Stock Exchange just before the attack on October 7.
Israel Securities Authority Responds
The Israel Securities Authority (ISA) has acknowledged the matter, confirming that it is currently under investigation by all relevant parties.
Volumes Surpass Previous Crisis Periods
The research indicates that the volume of short-selling preceding the October 7 attack exceeded levels observed during various other crises, including the 2008 financial crisis, the 2014 Israel-Gaza war, and the Covid-19 pandemic.
Leumi Shares
The report highlights a specific instance where 4.43 million new shares of Leumi, Israel's largest bank, were sold short between September 14 and October 5, leading to an almost 9% drop in share price on October 8.
Unusual Trading Activity
Researchers noted a sharp increase in short-selling during a period that is typically characterized by low activity in Israel due to Jewish holidays.
Similar Patterns Observed
The study points out similar short-selling patterns in early April, aligning with reports of initial Hamas plans to attack Israel, raising questions about potential insider information influencing trading decisions.
