TheChek News Flow

Ex-Goldman Sachs analyst aware of insider dealing ‘perils’, says prosecution

Jury shown news article from Mohammed Zina’s computer about two brothers who passed on inside information to trade on

A former Goldman Sachs analyst accused of insider trading with his brother was made aware of the “perils” of using privileged information before the alleged crimes happened, according to the prosecution at a London trial.

Mohammed Zina undertook compliance training at the Wall Street bank weeks before he joined Goldman’s London conflict resolution group in 2016, which is privy to inside information. The training warned of the dangers of insider dealing and made clear that preapproval was required for any trading he did, according to documents shown in court on Monday.

“[He] can’t say he wasn’t warned,” Peter Carter KC, the prosecutor acting for the Financial Conduct Authority, told the jury at Southwark Crown Court. “[He was made aware of] all the perils of using inside information.”

Zina, 35, is on trial with his brother Suhail Zina, 36. The pair are accused of insider dealing in six stocks between July 2016 and December 2017, and three counts of fraud in relation to loans they obtained from Tesco Bank, charges they deny. The prosecution’s comments form part of its opening statement in the case, which started last week.

The jury on Monday was shown snapshots from searches made by Mohammed Zina on his computer, including a December 2016 article he looked at about a US insider dealing case involving two brothers. The article was read to the jurors by Carter.

The New York Times story was an account of a victory by prosecutors in a Supreme Court case centred on insider dealing. The trial involved two brothers who had passed information between each other before giving it to the future brother-in-law of one of them to trade on.

“Why did it have such resonance for him?” said Carter of the article. “We say it’s obvious. It didn’t stop him.”

The prosecution told the jury that Suhail Zina had also undertaken compliance training on insider trading at his then-employer Clifford Chance.

Suhail Zina was a trainee solicitor at the “magic circle” firm between February 2015 and February 2017 before moving into its property finance department upon qualification.

WhatsApp messages between the brothers about the trading and Tesco loans intimate that Suhail knew Mohammed was using inside information, said Carter.

“These little snippets of information are really the indication of what was known, what had to be said, what didn’t have to be said . . . to keep each other in the know,” he told the jury.

The jury was told last week that the brothers made profits in the region of £140,000 from their dealing. The alleged insider trading in question carries a maximum penalty of seven years in prison, while fraud carries a maximum sentence of 10 years.

The trial continues.

FCA under fire as MPs and lawyers say investors could retrieve more lost money through courts

MPs have called for an inquiry into the handling by UK regulators of compensation for investors with money still trapped in disgraced stock picker Neil Woodford’s collapsed equity fund.

Four years after one of Britain’s biggest investment scandals, about a third of the £3.6bn trapped in Woodford’s Equity Income Fund affecting about 300,000 investors has yet to be recovered, according to lawyers.

A letter to the government from MP Bob Blackman, who chairs parliament’s personal banking and fairer financial services group, a draft of which has been seen by the Financial Times, has called for an independent inquiry into the compensation process backed by the Financial Conduct Authority.

Investors could be better off pursuing losses through the legal system rather than voting on a FCA-backed reimbursement scheme, say MPs and legal advisers.

“I am hoping there will be an inquiry,” Blackman told the FT. “Clearly there are serious questions to be answered. I don’t think what the FCA has done is adequate, to put it mildly.”

The draft letter, signed by seven MPs and six members of the House of Lords, is addressed to City minister Bim Afolami, stating that it “wishes to alert . . . very serious concerns that the regulator is still failing in its responsibility to deliver appropriate consumer protection”.

Investors have until 5pm today to approve the scheme to repay money that was lost when Woodford’s income fund was suspended, or gated, in 2019.

If the vote passes, investors will share a redress package, which could total up to £230mn for losses, according to the FCA. This would be on top of £2.57bn of investor capital, which has already been repaid, according to Link Fund Solutions, the administrator of Woodford’s fund.

If paid in full, investors would be repaid 77 per cent of the losses they incurred after the fund was gated, according to calculations by the FCA.

It would also mean the total sum investors will receive after further capital repayments will be 80 per cent of their investment at the time of suspension, according to Link.

The FCA maintains that the redress scheme is the best way for most people to get money back.

“Payouts through other means such as litigation or the FSCS [Financial Services Compensation Scheme] are not guaranteed and will probably take longer to achieve. We firmly believe that what is being offered by Link warrants serious consideration by investors,” the regulator said.

But MPs and lawyers, including law firm Harcus Parker, which represents about 7,000 investors in the fund and is suing Link, warn the redress represents a “bad deal”, with shareholders not properly informed of the alternatives.

There are further questions over the way the FCA has calculated the redress, which does not cover losses before the fund was suspended in 2019.

Harcus Parker told the FT it believed the vast majority of private investors would be better off making a claim against Link in court, a route backed by Blackman.

This would mean forcing Link into insolvency and then claiming their money back — up to the limit of £85,000 per investor — from the FSCS, the statutory body used to oversee investor compensation.

“We don’t think it’s a good deal. It has a whiff of self-interest about it,” said Daniel Kerrigan, partner at Harcus Parker.

“On any measure, a very large amount of money has been lost, and what is being proposed is a much smaller sum. They are also conflating repayment of investor money with compensation for losses, which has led to much confusion.

“The fund was said to be worth some £3.6bn at the point of suspension. Investors have had back £2.57bn so far. You don’t have to be a mathematician to see the gap.”

Others say the regulator is also undermining the process by telling investors to back the reimbursement scheme, which they say jeopardises the trust and confidence in the system.

“They ought to be seen as an independent, credible oversight body: a referee not a player on the pitch,” said Andy Agathangelou, head of the Transparency Task Force, which campaigns for Woodford investors.

Woodford’s fund collapsed after a downturn deflated the value of its public holdings and it struggled to meet investor demands for redemptions.

An FCA investigation found that Link made “critical mistakes and errors” in managing the fund’s liquidity, resulting in the fund failing to have a “reasonable and appropriate liquidity profile” from September 2018.

The Treasury declined to comment.

Gold touches all-time high as speculation grows that Fed will soon lower borrowing costs

Bitcoin surged to its highest price in nearly 20 months while gold hit an all-time peak on Monday, as frenzied investor speculation that interest rates will fall next year rippled through assets across the globe.

The cryptocurrency soared to more than $42,000 on Monday, up 8.2 per cent on the previous day, also boosted by optimism that the toughest regulatory punishments for the industry have passed.

Gold rallied as much as 3 per cent to $2,135 per troy ounce on Monday, a new record, before slipping to $2,069 per troy ounce, according to LSEG data.

The moves follow a recent rush into stocks and bonds, fuelled by growing expectations that the Federal Reserve will soon cut borrowing costs despite chair Jay Powell’s assertion on Friday that it was “premature” to conclude that the central bank has won its battle with inflation.

“You look at bitcoin and gold and you see a very similar kind of evolution,” said Luca Paolini, chief strategist at Pictet Asset Management. “All the asset classes that tend to do well when the Fed cuts rates aggressively are doing well.”

Traders are now betting the first rate reduction could come as soon as March after a sharp decline in government and corporate borrowing costs as US bond markets enjoyed their biggest monthly rally in nearly four decades in November.

Lower yields on ultra-safe US Treasury debt have made other assets relatively more attractive to investors. The S&P 500 index closed at its highest level since March 2022 last week. Recent US economic data has been resilient even while inflation has fallen, further boosting risky assets like stocks.

Max Kettner, chief multi-asset strategist at HSBC, said markets were in the grip of an “everyone-is-happy-Goldilocks rally” across “virtually all asset classes”.

Traders said the momentum to buy bitcoin, whose value has climbed by more than a fifth in the past month, was also driven by growing interest among investors after the closure of two of the most high-profile criminal cases that had hung over the market for the last year.

Last month the US successfully prosecuted Sam Bankman-Fried, former chief executive of FTX, and Binance, the world’s largest crypto exchange. Bankman-Fried was convicted of fraud and Binance paid $4.3bn in penalties after pleading guilty to criminal charges related to money laundering and financial sanctions breaches.

But despite many traders’ fears, US authorities did not shut down Binance. Binance continues to face a separate lawsuit from the Securities and Exchange Commission for allegedly violating securities laws.

“The message from many institutional investors was that they needed two things before looking at the space again: closure on FTX and clarity around Binance,” said Henri Arslanian, co-founder of Nine Blocks Management, a crypto hedge fund manager based in Dubai.

Ethereum, the second most actively traded cryptocurrency, also rose 8.3 per cent to $2,260 on Monday, its highest level since May last year.

Investors are also hopeful the SEC will approve an exchange traded fund for bitcoin in coming weeks. The SEC has refused for a decade to approve spot bitcoin ETFs, stock market funds that invest directly in the cryptocurrency.

Some of Wall Street’s largest investors, including BlackRock and Franklin Templeton, have joined companies such as VanEck and WisdomTree in submitting filings with the SEC.

The market has long viewed spot bitcoin ETFs as a way to wrest control of digital assets from scandal-ridden crypto groups in favour of mainstream businesses such as BlackRock.

“ETF speculation is going to continue to drive behaviour in the crypto market this week as investors buy into the narrative of the transformative impact opening the market to institutional investors will have on the ecosystem,” said Simon Peters, market analyst at eToro.

While the SEC has embarked on a year-long crackdown on crypto — including enforcement actions against groups such as US-listed exchange Coinbase — pressure is growing on the regulator to approve a bitcoin spot ETF.

Crypto asset manager Grayscale scored a watershed legal victory this year when a federal appeals court ruled the SEC was wrong to reject its application to convert its flagship Grayscale Bitcoin Trust into an ETF.

More financial advisers are using OpenAI-powered chatbot after Altman drama, but some say it's easier to pick up the phone and ask a human.

uring the most harrowing moments of the OpenAI leadership crisis, one of the startup’s biggest partnerships—a deal with Morgan Stanley that is supposed to demonstrate how AI can change the game at a giant, highly regulated Wall Street bank—was left twisting in the wind.

Executives at Morgan Stanley, one of OpenAI’s biggest customers, wondered what would happen to their chatbot for financial advisers if OpenAI fell apart. They discussed what they might do if Altman wasn’t reinstated as CEO and OpenAI employees left in droves, a person familiar with the matter said, though they didn’t lay out formal plans. There were no easy solutions. For instance, they discussed bringing the chatbot in-house, but that wound up being a nonstarter because of concerns about who owned the intellectual property and how it might run without OpenAI employees, the person said.

THE TAKEAWAY

• Morgan Stanley executives worried during Altman crisis about fate of adviser chatbot

• OpenAI adviser tool is used twice as much as Morgan Stanley’s prior, self-made chatbot; leadership crisis at OpenAI may have encouraged usage

• Some advisers at Morgan Stanley don’t find chatbot useful

But the chatbot never stopped working, and its usage among employees has actually shot up recently—at least partly because of OpenAI’s prevalence in the news, the person said. Detailed data on the chatbot’s usage couldn’t be obtained, but the number of searches employees are running is currently twice as high with the OpenAI tool as it was with Morgan Stanley’s previous virtual assistant, which the bank built in-house, the person said.

That increased usage will help improve the tool, which has so far gotten a mixed reception internally, according to several Morgan Stanley employees who spoke with The Information.

The chatbot, called AI @ Morgan Stanley Assistant, is designed to help financial advisers quickly pull up information for customers of Morgan Stanley’s wealth management business. After early trials with a small task force of wealth management employees, the bank rolled out the chatbot across the business in September. Executives have prodded workers to use it. Some employees have sung its praises, while others say it struggles to answer complex questions and they could more easily call someone internally who knows the answers.

A person familiar with the company’s AI operations said it has seemed like the tool isn’t widely used by financial advisers and is more often used by administrative staff.

Morgan Stanley declined to comment. OpenAI did not have a comment in time for publication. OpenAI executives including Altman have publicly thanked their partners for sticking with the company through the turbulence.

In early trials, advisers who spoke with The Information said they were unimpressed with the chatbot. The tool could easily pull up certain material—for example, the most recent Morgan Stanley research about Apple’s stock—but struggled to help with more sophisticated questions about, for instance, structuring an LLC under specific state guidelines. Advisers also had to learn to “talk” to the bot, rather than searching for keywords the way they would with a traditional search engine.

That’s a different scenario than Morgan Stanley and OpenAI painted in March, when an OpenAI webpage about their partnership quoted a Morgan Stanley executive saying: “Think of it as having our Chief Investment Strategist, Chief Global Economist, Global Equities Strategist, and every other analyst around the globe on call for every adviser, every day.”

The tool can only use the bank’s own internal data and research. That makes it a unique challenge for OpenAI, which typically can tap the internet for material.

The partnership between Morgan Stanley and OpenAI has wide-ranging implications. Altman himself brokered the deal, The Information has reported, and it is key to showing what ChatGPT can do within a heavily regulated industry with a huge employee base. The Information previously reported that even before Altman was fired, Morgan Stanley had planned to shift more of its AI software to rely on Microsoft’s Azure cloud, which hosts a version of OpenAI’s ChatGPT, and that Morgan Stanley had also been in contact with Anthropic before Altman’s ouster.

The OpenAI chatbot for wealth isn’t Morgan Stanley’s only artificial intelligence endeavor. The bank routinely meets with other AI providers, uses other companies for less ambitious AI initiatives and spent years working on the in-house chatbot prior to the partnership with OpenAI.

There is also an AI initiative called Project Genome that examines the financial DNA of customers of its wealth management business to predict what products and services they might need. If a customer has a young child, for instance, the analysis might suggest starting a college savings fund. If another customer has a lot of cash and isn’t keen on risky investments, it might suggest CD products with higher interest rates than basic savings products.

The bank also recently launched a product with TIFIN Group, a wealth management–focused AI company. That initiative, part of Morgan Stanley at Work, relates to donor-advised funds for charitable giving. Morgan Stanley at Work, which helps companies manage stock plans and other benefits for employees, is a key part of Morgan Stanley’s plan to grow wealth management revenue.

The company still plans to expand direct use of the OpenAI tool over the long term, from advisers to clients, a person familiar with the matter said. The bank needs to make sure it works out all the kinks before then. Over the much longer term, executives see extensive possibilities for using AI to improve productivity and performance across businesses beyond wealth management, including trading, investment banking, asset management and lending.

When Morgan Stanley banking analyst Betsy Graseck asked CEO James Gorman about the bank’s AI tools at an event in June, he said they were targeted more toward revenue generation than cutting headcount or saving costs.

“I would say this about the team there: They’ve got a much stronger technology bent than I had when I was running the business,” said the 65-year-old CEO, who is retiring next year. “I think it really has leapfrogged way past where my capabilities were.”

EnergyRe, startup backed by real-estate executives, raises $1.2 billion for transmission projects

U.S. cities racing to cut their emissions are facing a roadblock: They can’t access the wind and solar power being developed in remote sites hundreds of miles away.

Now a group of investors is betting on a startup that builds massive transmission lines to carry renewable electricity to urban areas.

EnergyRe, launched by executives at real-estate company Related Cos., said Monday that it raised $1.2 billion from a group of European investors to build more projects across the U.S.

The deal comes as the Biden administration is pushing to modernize the national power grid, which isn’t equipped to handle the growing amounts of renewable energy that the country is hoping to produce to wean itself off fossil fuels. Already, surging electricity demand has strained the grid and led to more frequent outages in recent years.

“If we want to have reliable power, we need to have a new grid,” Miguel Prado, energyRe’s chief executive and an industry veteran, said in an interview.

The high-voltage transmission lines needed to carry clean energy long distances are notoriously difficult to get permitted, in part because of fierce resistance from local residents, and have become a major obstacle for the country’s climate goals. Last year, wind- and solar-generating projects accounted for roughly 90% of power projects waiting to join electric grids, according to the Lawrence Berkeley National Laboratory.

The backlog is pushing more companies to launch transmission projects. Among them is a 175-mile underground transmission line to bring power from a cluster of upstate wind and solar projects to New York City. It is part of a roughly $11 billion collaboration that includes energyRe, a Blackstone-backed renewable developer and the state of New York.

The funding announced by energyRe on Monday will go toward such projects and is made up of $800 million in equity and $400 million in debt. The investors include European transmission firm Elia Group ELI 0.15%increase; green up pointing triangle, Denmark-based funds Glentra Capital and PKA and the investment manager of the Novo Nordisk Foundation, the controlling shareholder of drugmaker Novo Nordisk NVO -1.41%decrease; red down pointing triangle.

Such overseas investors have been pouring money into U.S. companies to capitalize on the climate law, which included billions of dollars in clean-energy subsidies.

Other projects are springing up around the country, too. A 339-mile transmission line to carry hydropower from Quebec to New York City is being backed by Blackstone. Three proposed transmission lines from companies including Grid United, Berkshire Hathaway and National Grid recently got a $1.3 billion commitment from the Energy Department.

EnergyRe is applying for similar government funding and said it is giving priority to projects it thinks can avoid permitting snarls. Its New York transmission line, for example, spans land controlled by the state. Another 350-mile transmission line to carry power from Iowa to the Chicago area will be built along railroad tracks.

Still, energyRe will have to contend with the higher interest rates and costs that have hit other clean-energy businesses this year. The company, which is also developing an offshore wind project near New York and New Jersey, said tax credits from the climate law should help absorb expenses.

The startup was created in 2020 with initial backing from executives at Related, who saw the need for clean power in cities to comply with local regulations and meet demand from big companies.

Founded by Miami Dolphins owner Stephen Ross, Related is a developer of splashy properties such as New York’s Hudson Yards as well as condos and affordable housing. The company took advantage of low-income housing tax credits for years before new clean-energy credits and transmission-funding programs were created.

“It is such an evident problem and huge opportunity,” said Jeff Blau, Related’s CEO and chairman of energyRe.

Giant gambles against Israel on the markets in Tel Aviv and Wall Street days before Hamas’ attack made billions. Somebody seems to have known about the plan in advance

Hamas’ attack on Israel on October 7 caught the Israeli army unprepared. But somebody seemingly knew in advance and made billions betting against Israeli shares traded locally and on Wall Street five days before the attack.

Short-selling Israeli shares – betting that they will fall – spiked in the days before October 7, far exceeding the short selling during “numerous other periods of crisis,” Robert J. Jackson, Jr., Joshua Mitts and colleagues wrote in a paper titled “Trading on Terror?” published Sunday on SSRN.

'Our findings suggest that traders informed about the coming attacks profited from these tragic events.'

While the source of the putative information leading to the short selling isn’t known, it plausibly originated in Hamas circles: “Our findings suggest that traders informed about the coming attacks profited from these tragic events,” they wrote.

Jackson served as commissioner of the U.S. Securities and Exchange Commission and Mitts is an expert on short selling, where the investor is betting against the security. He is also familiar with the Israeli market.

The ex-commissioner and the team examined transactions in EIS, which is a security traded on the New York Stock Exchange through which investors can gain exposure to Israeli shares (MSCI Israel Exchange-Traded Fund, or NYSE: EIS).

EIS is an exchange-traded fund that tracks Israeli shares in New York. It’s a way to bet on Israeli shares without buying any. EIS tracks the main indices on the Tel Aviv Stock Exchange, including giant Israeli companies such as Nice, Teva, the banks, Elbit Systems and Israel Chemicals.

Investing in EIS is equivalent to investing in the Israeli economy. Betting against EIS means you are betting against the Israeli economy.

Jackson and the team found strong indications that, in early October, somebody in U.S. stock market circles anticipated catastrophe in Israel, leading stocks to crash.

On October 2, that somebody or somebodies carried out an enormous volume of short transactions on the EIS – meaning they bet against Israel.

In fact, the volume of short transactions on October 2 was so huge – 227,000 units, compared with a few thousand on any given day – that it didn’t seem like a gamble. Whoever was behind the transactions apparently harbored confidence that disaster would strike Israel.

Shorting involves profiting from securities you do not own. If you are confident that a given company’s shares are going to fall, you borrow them from somebody, sell them, and later (sometimes just within days) you buy them on the market (at the lower price, if you were right), give them back to the lender and pocket the difference.

So, if you short a stock and it falls, you win. People shorting Israeli shares on October 2 did well. The value of EIS fell by 7.1 percent on October 11 (the first day the American market was open for business after the massacre) and over the 20 days following that terrible weekend, EIS lost 17.5 percent of its value.

'Moreover, it indicates that the short selling that day far exceeded the short selling that occurred during numerous other periods of crisis, including the recession following the [2008] financial crisis.'

Specifically, if a trader borrowed a unit of EIS and sold it for $54, after the crash the trader could buy the unit for $44.50, return it to the lender and make $9.50 per unit.

The paper by Jackson and colleagues was based on data officially reported to the U.S. Financial Industry Regulatory Authority. The researchers identified two huge transactions selling borrowed units of EIS on October 2. Based on the volumes, the short sellers seem to have made millions of dollars.

To examine how unusual the gamble against Israel was, the researchers checked the volume of short transactions in EIS units from 2009 to 2023, during which Israel experienced plenty of crises. There were 3,570 trading days throughout that period. The volume of shorts on EIS on October 2 was in the top 99 percent percentile. The “short ratio” for EIS was also extraordinary on October 2: “It is extremely unlikely that the volume of short selling on October 2 occurred by random chance,” they wrote.

“Moreover, it indicates that the short selling that day far exceeded the short selling that occurred during numerous other periods of crisis, including the recession following the [2008] financial crisis, the 2014 Israel-Gaza war, and the COVID-19 pandemic,” they added.

Other grounds for their suspicion are the fact that the short transactions were carried out during the Sukkot Jewish holiday, when nothing unusual was happening in Israel and nothing dramatic was expected.

Jackson and Mitts even checked for correlation between the shorting and the Netanyahu government’s plans to overhaul the judiciary, where the greatest drama was on July 24 – the day the Knesset voted to revoke the reasonableness standard. The date of the vote was known in advance, though its results were not. In fact, EIS units lost 5 percent of their value following that vote, attesting that the market hadn’t anticipated the outcome. There was no unusual volume in shorts.

Also, shorting is risky. If you bet against a share and it rises, you lose. The bigger the short, and the longer it lasts (until you have to return the security), the bigger the risk. The giant gamble against EIS (meaning, against the Israeli economy) was done when the market was trending upward. Betting against a market trend just increases the risk. Also, the shorts were unusually long, strengthening the theory that the investor knew of the attack in advance.

Interestingly, Mitts and Jackson identified similar patterns in EIS in April, when rumors were circulating that Hamas was planning to launch an attack. “Specifically, short volume in EIS peaked on April 3 at levels very similar to those observed on October 2,” they stated. There, too, coincidence beggars belief and suggests the information originated in Hamas. Terrorists caught in Israel related that the attack had been planned for April 5, Passover eve, but was canceled at the last minute – whether because Iran ordered it so, according to some media sources, or because the Israeli army was on high alert at the time.

The short spike on April 3 was about a week after Prime Minister Benjamin Netanyahu tried to fire his defense minister, Yoav Gallant, triggering mass protests by Israelis. By April 3, however, it was clear that Netanyahu had reversed course on ousting Gallant – indicating that whoever was shorting Israel wasn’t doing so because of that rumpus, but because of the planned (albeit canceled) terror attack.

Very short in Tel Aviv

The researchers also looked into shorts on the TASE and found a significant spike in the days before October 7.

In fact, shorting on the TASE began to increase from August, but peaked in the week before the attack. There was no obvious reason for the behavior; Israel was on holiday, the public sector was shuttered and a lot of Israelis were on vacation. There is no reason to associate the shorting spike with the judicial overhaul, the researchers said, noting there was no particular shorting activity following the “reasonableness” vote in July.

Again, the suspicion arises that somebody had prior knowledge of the Hamas attack.

In addition, Jackson and Mitts didn’t identify an increase in short-selling shares in Israeli companies traded in New York (as opposed to short selling the index tracking Israeli shares). That could be because investors figured the military industries would do well from hostilities and many of the other companies operate in the international markets, so the terror attack on Israel shouldn’t hurt their business.

They noted that while the volume of additional trading in EIS was absolutely abnormal in New York, it wasn’t large in absolute terms – probably because there just isn’t that much trading in its units. But they definitely did observe spikes in short selling on the Tel Aviv Stock Exchange.

Shorting the TASE from mid-September to October would have been enormously lucrative, the researchers calculate. In just Bank Leumi alone, “4.43 million new shares sold short over the September 14 to October 5 period yielded profits (or approximates avoided losses) of 3.2 billion NIS [nearly $900 million] on that additional short selling.”

They couldn’t identify whether there was any connection between traders short selling in New York and Tel Aviv.

Note that Jackson and Mitts do not claim the information originated in Hamas. But the information they collated suggests as much. Hamas had planned the attack for months and its leader, Yahya Sinwar, seems to have planned not just the tactical aspect but logistical and financial aspects as well.

If one believes Hezbollah leader Hassan Nasrallah that he didn’t know about the Hamas attack in advance, then Hezbollah wasn’t the one shorting Israel. Nor Iran, by the same logic. Only investigation by law enforcement, in Israel and the United States, may uncover who benefited from the short transactions.

Note that shorting isn’t illegal, and U.S. securities law apparently doesn’t prohibit exploiting preknowledge of a terror attack. Nor is it some kind of insider-trading violation in Israel. But Israeli sources said Hamas has financially savvy people and it isn’t implausible that they lay behind these shorts. Furthermore, if the short selling was done by Hamas or on its behalf, then they are violations of the U.S. law prohibiting the financing of terror, and the United States could freeze the ill-gotten gains.