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In the run-up to its attack on Israel on October 7th, Hamas maintained tight operational security. The timing of the assault blindsided Israel’s army and intelligence services, and appears to have surprised even some of Hamas’s political leaders. However, a new working paper by Robert Jackson Jr, a former commissioner of America’s Securities and Exchange Commission, and Joshua Mitts of Columbia University suggests that someone had enough advance knowledge of the plan to make a small fortune profiting from a crash in the Israeli stockmarket.

The authors analysed trading patterns in Israeli shares in the weeks before the attack, and found anomalies consistent with a grim form of informed trading. Perhaps the most striking example is a surge in short sales—bets that a security’s price will fall—of a relatively illiquid exchange-traded fund (etf), which is listed on the New York Stock Exchange under the ticker eis, and tracks an index of Israeli share prices.

In September an average of 1,581 shares per day of EIS (together worth $85,000 or so) were sold short, representing 17% of the daily total trading volume in the ETF. But on October 2nd, five days before the attacks, a whopping 227,820 shares were shorted, accounting for 99% of EIS’s volume that day (see chart). Moreover, rather than reflecting a souring of market sentiment on Israeli equities, the entire increase in activity appears to have come from two transactions: one sale of 50,733 shares just before 3pm, and another for 174,869 shares 35 minutes later. Whoever made these trades could have made a $1m profit within a week, and a further $1m during the following three weeks.

Other securities tied to Israeli shares also showed suspicious patterns. During the three weeks before the attacks, the number of outstanding options contracts expiring on October 13th on American-traded shares of Israeli firms—the derivatives that would yield the greatest returns if prices moved sharply in the direction a trader expected, and expire worthless otherwise—rose eightfold. In contrast, the number of longer-dated options on such shares, whose value depended on events beyond mid-October, barely changed.

Could there have been another cause? The shorting of airline stocks ahead of the attacks of September 11th may have been prompted by forthcoming earnings announcements. Yet there seems no such alternative in this case, notes Eric Zitzewitz of Dartmouth College. The paper’s authors examined other recent periods of turmoil in Israel, such as that prompted by the government’s attempted judicial reform earlier this year, and did not detect similar behaviour. The only match for the anomalies was in early April—two days before the Jewish holiday of Passover, which according to reporting by Channel 12, an Israeli tv station, was the date originally scheduled for Hamas to launch its attack.

The study has prompted an investigation by Israel’s securities authority. Given the secrecy around the attacks, news is unlikely to have leaked to a short-seller on Wall Street. Unless it was dumb luck, whoever placed the trades in New York and Tel Aviv was probably inside Hamas, or close enough to know its military secrets. In the past two months, America has banned just one trading firm for its ties to Hamas—a crypto exchange in Gaza that was linked to illicit transactions worth a mere $2,000. Somebody has managed to pull off a far bigger coup. Mr Mitts reckons that the trades he and his co-author have detected are “just the tip of the iceberg”. ■