Israel Investigates Claims of Short Selling Before Hamas Attacks

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Facts

  • Israel is investigating a report by prominent US researchers that claims investors might have been aware of Hamas' planned attack on Oct. 7 in advance and used that information to profit millions of dollars by short-selling Israeli stocks.1
  • Law Professors Robert Jackson Jr. of New York University and Joshua Mitts of Columbia University published the report Monday, which analyzed financial transactions leading up to the attack, noting a large number of investors shorting Israeli shares and profiting millions. Shorting is when an investor 'borrows' a security expecting it to fall, sells it, and then buys it back, netting the difference.2
  • The 67-page paper cited an unidentified trader who reportedly profited nearly $900M after short-selling 4.43M shares of Leumi, Israel’s largest bank, between Sept. 15 and Oct. 5. It also noted transactions on the Enterprise Investment Scheme (EIS), a security traded on the New York Stock Exchange (NYSE) that gives investors exposure to Israeli exchange-traded funds (ETFs).3
  • On Oct. 2, 227K short transactions were made against the EIS exchange, a high volume that they wrote was 'extremely unlikely' to occur by chance. Five days after the attack, the value of EIS fell by 7.1%. It's unclear if Hamas or its funders were behind the short sales, but news outlets have said that it's not implausible.4
  • The authors said the unusually high volume of transactions was even more peculiar since it came during the Jewish holiday of Sukkot, a time that is usually quiet in both news events and financial activity. They noted a similar pattern around Passover in early April when Hamas reportedly had planned a similar attack that was called off at the last minute.5
  • The Tel Aviv Stock Exchange (TASE) on Tuesday called the report inaccurate and argued its publishing was irresponsible, saying the authors miscalculated the number of shares being sold since share prices are listed in agorot, which are similar to cents, rather than shekels. TASE estimates the Leumi short sale netted 32M shekels ($8.59M) in profits, not 3.2B shekels ($859M). The report has since been corrected.6

Sources: 1The Guardian, 2CBS, 3New York Post, 4FOX News, 5The Telegraph and 6Reuters.

Narratives

  • Narrative A, as provided by Blaze Media. The overwhelming data analysis presented by two premier academics shows that investors likely knew about the terror organization’s brutal attack on Israel and used that information to profit off the tragedy. It's not a coincidence to see an exponential increase in trading that bet against the Israeli economy right before the country experienced one of its worst terror attacks. Rigorous analysis shows that this increase could not have been by chance, especially since a similar pattern was observed before a previously planned attack.
  • Narrative B, as provided by Globes. The American professors who published this report acted completely irresponsibly and committed clear errors in their analysis. While trying to analyze the pattern of trading in the lead-up to Oct. 7, these so-called brilliant scholars did not pay attention to the denomination of currency used on the trading exchanges and confused agorot with shekels. One hundred agorot equals one shekel — financial knowledge one should learn about before publishing speculative and defamatory reports like this one.