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Tel Aviv Stock Exchange (inducted in 2020)

Photo: Amir Cohen / REUTERS

Israeli authorities are investigating a report by U.S. academics that some investors may have known in advance of the attack plan by the radical Islamic group Hamas on October 7. Research by law professors Robert Jackson Jr. of New York University and Joshua Mitts of Columbia University had found that there was significant shorting of stocks in the run-up to the attacks. These are usually highly speculative bets on falling prices. "Days before the attacks, traders seemed to be anticipating the coming events," the researchers said in a report, referring to short selling in the MSCI Israel ETF, an investment fund that primarily bundles shares of Israeli companies. These short sales "suddenly and significantly skyrocketed" on Oct. 2, according to data from U.S. regulator Finra.

Has Hamas made billions?

On the Tel Aviv Stock Exchange, short selling of Israeli securities has risen dramatically, according to the 66-page report. The Israel Securities Authority told Reuters news agency that it was aware of the matter. It is being "investigated by all relevant parties". A spokeswoman for the securities regulator did not want to comment further, and the Israeli police were not immediately available for comment.

In the case of short selling, investors bet on falling prices. According to the U.S. researchers, short selling before October 7 surpassed those before other crises such as the financial crisis, the 2014 Israel-Gaza war or the coronavirus pandemic. "Although we did not see an overall increase in short selling by Israeli companies on U.S. stock exchanges, we did see a sharp and unusual increase in trading in risky short options on companies that expired shortly after the attacks, shortly before the attacks," said the report, which was first reported by the Israeli financial news site The Marker. Our results suggest that traders who were aware of the impending attacks benefited from these tragic events." The incident has sparked speculation in Israel that even Hamas may have made a lot of money through the stock exchange operation.