SEC SECRET
PROBE OF STOCK DEALINGS BEFORE 9/11
Between August 26 and September 11, 2001, a group of speculators, identified
by the American Securities and Exchange Commission as Israeli citizens, sold
"short" a list of 38 stocks that could reasonably be expected to fall
in value as a result of the pending attacks. These speculators operated out of
the Toronto, Canada and Frankfurt, Germany, stock exchanges and their profits
were specifically stated to be "in the millions of dollars."
Short selling of stocks involves the opportunity to gain large profits by
passing shares to a friendly third party, then buying them back when the price
falls. Historically, if this precedes a traumatic event, it is an indication of
foreknowledge. It is widely known that the CIA uses the
Promis software
to routinely monitor stock trades as a possible warning sign of a terrorist
attack or suspicious economic behavior. A week after the Sept.11 attacks, the
London
Times reported that the CIA had asked regulators for the Financial Services
Authority in London to investigate the suspicious sales of millions of shares
of stock just prior to the terrorist acts. It was hoped the business paper
trail might lead to the terrorists.
Investigators from numerous government agencies are part of a clandestine
but official effort to resolve the market manipulations There has been a great
deal of talk about insider trading of American stocks by certain Israeli groups
both in Canada and Germany between August 26 and the Sept.11 attacks on the
World Trade Center and the Pentagon.
Lynne Howard, a spokeswoman for the Chicago Board Options Exchange (CBOE),
stated that information about who made the trades was available immediately.
"We would have been aware of any unusual activity right away. It would
have been triggered by any unusual volume. There is an automated system called
'blue sheeting,' or the CBOE Market Surveillance System, that everyone in the
business knows about. It provides information on the trades - the name and even
the Social Security number on an account - and these surveillance systems are
set up specifically to look into insider trading. The system would look at the
volume, and then a real person would take over and review it, going back in
time and looking at other unusual activity."
Howard continued, "The system is so smart that even if there is a news
event that triggers a market event it can go back in time, and even the
parameters can be changed depending on what is being looked at. It's a very
clever system and it is instantaneous. Even with the system, though, we have
very experienced and savvy staff in our market-regulations area who are always
looking for things that might be unusual. They're trained to put the pieces of
the puzzle together. Even if it's offshore, it might take a little longer, but
all offshore accounts have to go through U.S. member firms - members of the
CBOE - and it is easily and quickly identifiable who made the trades. The
member firm who made the trades has to have identifiable information about the
client under the 'Know Your Customer' regulations (and we share all information
with the Securities and Exchange Commission.)"
Given all of this, at a minimum the CBOE and government regulators who are
conducting the secret investigations have known for some time who made the
options puts on a total of 38 stocks that might reasonably be anticipated to
have a sharp drop in value because of an attack similar to the 9/11 episode.
The silence from the investigating camps could mean several things: Either
terrorists are responsible for the puts on the listed stocks or others besides
terrorists had foreknowledge of the attack and used this knowledge to reap a
nice financial harvest from the tragedy.
Adam Hamilton of Zeal LLC, a North Dakota based private consulting company
that publishes research on markets worldwide, stated that "I heard that
$22 million in profits was made on these put options..."
Federal investigators are continuing to be so closed mouthed about these
stock trades, and it is clear that a much wider net has been cast, apparently
looking for bigger international fish involved in dubious financial activity
relating to the 9/11 attacks on the world stock markets.
Just a month after the attacks the SEC sent out a list of stocks to various
securities firms around the world looking for information. The list includes
stocks of
American, United, Continental, Northwest, Southwest and US Airways
airlines, as well as Martin, Boeing, Lockheed Martin Corp., AIG, American
Express Corp, American International Group, AMR Corporation, Axa SA, Bank of
America Corp, Bank of New York Corp, Bank One Corp, Cigna Group, CNA Financial,
Carnival Corp, Chubb Group, John Hancock Financial Services, Hercules Inc, L-3
Communications Holdings, Inc., LTV Corporation, Marsh & McLennan Cos. Inc.,
MetLife, Progressive Corp., General Motors, Raytheon, W.R. Grace, Royal
Caribbean Cruises, Ltd., Lone Star Technologies, American Express, the
Citigroup Inc. ,Royal & Sun Alliance, Lehman Brothers Holdings, Inc.,
Vornado Reality Trust, Morgan Stanley, Dean Witter & Co., XL Capital Ltd.,
and Bear Stearns.
The
Times said market regulators in Germany, Japan and the US all had
received information concerning the short selling of insurance, airlines and
arms companies stock, all of which fell sharply in the wake of the attacks.
City of London broker and analyst Richard Crossley noted that someone sold
shares in unusually large quantities beginning three weeks before the assault on
the WTC and Pentagon.
He said he took this as evidence that someone had insider foreknowledge of
the attacks.
"What is more awful than he should aim a stiletto blow at the heart of
Western financial markets?" he added. "But to profit from it? Words
fail me."
The US Government also admitted it was investigating short selling, which
evinced a compellingly strong foreknowledge of the coming Arab attack.
There was unusually heavy trading in airline and insurance stocks several
days before Sept.11, which essentially bet on a drop in the worth of the
stocks.
It was reported by the Interdisciplinary Center, a counter-terrorism think
tank involving former Israeli intelligence officers, that insiders made nearly
$16 million profit by short selling shares in
American and
United
Airlines, the two airlines that suffered hijacking, and the investment firm
of
Morgan Stanley, which occupied 22 floors of the WTC.
Apparently none of the suspicious transactions could be traced to bin Laden
because this news item quietly dropped from sight, leaving many people
wondering if it tracked back to American firms or intelligence agencies.
Most of these transactions were handled primarily by
Deutsche
Bank-A.B.Brown, a firm which until 1998 was chaired by A.
B."Buzzy" Krongard, who later became executive director of the CIA.
More serious was an article in the Sept. 28, 2001 edition of the Washington
Post stating that officials with the instant messaging firm of
Odigo in
New York confirmed that two employees in Israel received text messages warning
of an attack on the WTC
two hours before the planes crashed into the
buildings!
The firm's vice president of sales and marketing, Alex Diamandis said it was
possible that the warning was sent to other Odigo members, but they had not received
any reports of such.
The day after, the
Jerusalem Post claimed two Israelis died on the
hijacked airplanes and that 4,000 were missing at the WTC.
A week later, a Beirut television station reported that 4,000 Israeli
employees of the WTC were absent the day of the attack.
This information spread across the Internet but was quickly branded a hoax.
On Sept. 19, the
Washington Post reported about 113 Israelis were
missing at the WTC and the next day, President Bush noted more than 130
Israelis were victims.
Finally, on Sept. 22, the
New York Times stated "There were, in
fact, only three Israelis who had been confirmed as dead: two on the planes and
another who had been visiting the towers on business and who was identified and
buried."
Investigators from numerous government agencies are part of a clandestine
but official effort to resolve the market manipulations There has been a great
deal of talk about the insider trading of American stocks by certain Israeli
groups both in Canada and Germany between August 26 and the Sept.11 attacks on
the World Trade Center and the Pentagon.
Government investigators have maintained a diplomatic silence about a
Department of Justice (DOJ) probe of possible profiteering by interested
parties with advance knowledge of the attack.
On Sept. 6, 2001, the Thursday before the tragedy,
2,075 put options
were made on United Airlines and on Sept. 10, the day before the attacks,
2,282
put options were recorded for American Airlines. Given the prices at the time,
this could have yielded speculators between
$2 million and $4 million in
profit.
The matter still is under investigation and none of the government
investigating bodies - including the FBI, the Securities and Exchange
Commission (SEC) and DOJ - are speaking to reporters about insider trading.
Even so, suspicion of insider trading to profit from the Sept. 11 attacks is
not limited to U.S. regulators. Investigations were initiated in a number of
places including Japan, Germany, the United Kingdom, France, Luxembourg, Hong
Kong, Switzerland and Spain. As in the United States, all are treating these
inquiries as if they were state secrets.
A scholarly article by Poteshman (2006) in
the Journal of Business,
using econometric modeling, claimed high probability of insider trading
for American Airlines and United Airlines put-option purchasing shortly
before September 11th. Were they random, the American purchases had
only a 1% probability of occurrence; the United Airlines put-option
purchasing was less improbable, but on September 6 had only a 4%
probability of occurrence (both measures obtained by comparisons of the
airline values reported on p. 1720, Table 4, to the benchmark values
reported on p. 1713, Table 1). 
