The report by law professors Robert J. Jackson Jr. of New York University School of Law (NYU Law) and Joshua Mitts of Columbia Law School found a sharp rise in short-selling of Israeli stocks in the weeks leading up to the attack, in which thousands of Hamas gunmen stormed the border, murdering 1,200 people, wounding more than 5,000 and taking 240 hostages back to the Gaza Strip.

“Days before the attack, traders appeared to anticipate the events to come,” they wrote in a 66-page report. They cited a sudden and significant spike in short interest in the MSCI Israel Exchange Traded Fund (ETF) on Oct. 2 based on data from the Financial Industry Regulatory Authority (FINRA).

“And just before the attack, short selling of Israeli securities on the Tel Aviv Stock Exchange (TASE) increased dramatically.”

The Israel Securities Authority told Reuters that “the matter is known to the authority and is under investigation by all the relevant parties.”

The researchers wrote: “Although we see no aggregate increase in shorting of Israeli companies on U.S. exchanges, we do identify a sharp and unusual increase, just before the attacks, in trading in risky short-dated options on these companies expiring just after the attacks.

“Our findings suggest that traders informed about the coming attacks profited from these tragic events, and consistent with prior literature we show that trading of this kind occurs in gaps in U.S. and international enforcement of legal prohibitions on informed trading,” they added.

According to the researchers, the findings show that the short sales were larger than in the days before previous rounds of fighting between Israel and terrorists in Gaza, as well as before the outbreak of COVID-19.

They also referred to similar patterns in April when it was reported that Hamas initially planned the attack on Israel.

“Short volume in EIS [the MSCI Israel ETF] peaked on April 3 at levels very similar to those observed on Oct. 2 and was far higher by an order of magnitude than other days prior to April 3,” they said.