U.S. researchers claim 'informed traders' profited massively from October 7 attack
Professor Joshua Mitts of Columbia and Robert J. Jackson Jr. of NYU found odd transactions focused on downturn of Israeli companies prior to Hamas-led attack
"Informed traders" knew about the Hamas-led October 7 attack on Israel, before it happened, and made massive profits on the U.S. and Israeli stock exchanges, according to a study by researchers at Columbia University and New York University.
An odd and significant rise in short positions on Israel-based companies, and exchange-traded funds (ETFs) tracking Israeli companies, were placed in expectation that stock prices would fall shortly after October 7, according to findings by Professor Joshua Mitts of Columbia Law School and Robert J. Jackson Jr. of the New York University School of Law.
In one example, the study by the U.S. researchers showed that a short position expecting a fall in prices was built amounting to 4.43 million shares in Bank Leumi. Thus, after the October 7 attack led by Hamas, the short brought profits of $863 million.
What made it most odd was that there was no cumulative rise in short positions to suggest a trend that might be followed, between the activity of September 14 and October 5, as such the stock of Israeli companies traded on U.S. exchanges with a sharp and unusual rise in short options expiring shortly after October 7.
Furthermore, the shorts were larger than days preceding similar events, such as other rounds of fighting between Israel and terrorist groups in Gaza or the Covid-19 pandemic. Nor at the scale seen in this study, with dozens of Israeli companies targeted.
The study added another point of reference, saying there was no similar rise in shorts before a contentious legislation of the Israeli government's judicial reform that was passed on July 24, 2023, which subsequently set off a fall in stock prices.
The study concluded that there were traders who knew about the attack led by the terrorist organization Hamas, leading to massive profits from the ensuing massacres and war. The law professors say the evidence is consistent with informed trading, and were now pursuing the extent current securities law could be applied to this case.