Skip to comments.Profits of doom
Posted on 10/10/2001 10:01:05 AM PDT by CommiesOut
Profits of doom
Grant Ringshaw finds the terrorists made millions by sophisticated trading before they attacked
ONE option trader recalls: "The market had been dead. Then all of a sudden there was a huge spike in trading in certain options - it just came out of nowhere. You have to think that there was something suspicious going on."
Last week the financial world realised that the Islamic terror groups behind the devastating attacks on America could have made millions by short-selling shares and derivatives through a secret financial network before the attack took place - the largest and most chilling piece of insider dealing in history.
In the past seven days, international intelligence agencies, worldwide financial regulators and the world's biggest financial institutions have been sifting through millions of records in a bid to find who perpetrated the rogue deals.
The investigation is part of a wider probe into the financial network of Osama bin Laden, the Islamic radical who the United States believes masterminded the attacks.
Investigators are seeking to freeze bank accounts and other assets belonging to bin Laden, who is thought to have a personal fortune of $300m, his associates and Afghanistan's Taliban government.
So far the focus of the international probe into suspicious trading has centred on an extraordinary surge in trading in certain airlines and insurance companies in the days immediately ahead of the attacks on September 11.
Liffe, the London futures and options market, is understood to be particularly concerned about a huge spike in trading in options based on British Airways' shares. On September 7 - the Friday before the attacks - 2,184 "put" contracts were traded. This was almost five times the normal daily trading volume.
Buyers of put options seek to make profits from an anticipated fall in a company's share price by selling borrowed shares and later buying them back at a lower price.
According to figures from the London Stock Exchange, there was also a massive spike in trading of BA shares on September 6 with around 32m shares changing hands - almost three times the normal level.
Traders at the Chicago Board Options Exchange, the world's biggest options market, were also perplexed by surges in other airlines including United Airlines and American Airlines, which each had two planes hijacked and used as weapons by the terrorists.
Three trading days before the attack, the volume of puts in United rocketed to 2,000 contracts - an astonishing 285 times the average trading level. The day before two American Airlines' planes were hijacked and crashed, the number of put options bought in the airline rose to reach 60 times the daily average.
In Amsterdam, traders and regulators were also astonished to see a huge rise in put options in KLM, the Dutch airline. For weeks, only around a dozen puts had been bought in the airline each day, but on the two trading days before the attacks on the World Trade Centre an incredible 1,800 contracts were bought.
International investigators also believe there may have been suspicious trading in insurance companies such as Munich Re and Swiss Re, the world's two biggest reinsurers.
On September 6 and 7, trading was almost double the normal level in Munich Re, which has estimated its losses on the disaster at £1.2bn. The company's shares fell by 12 per cent in the four days before the September 11 attacks and 15 per cent on the day of the strike.
Trading in the shares of Swiss Re, which has estimated its losses at £835m, was more than double average daily volumes on September 7 with regulators particularly concerned about a number of large block trades.
The international probe is also understood to be investigating options trades in some of the world's biggest financial institutions including Axa, the French insurer, Citigroup, the financial services company which has a $500m liability to the disaster through its Travellers insurance subsidiary, and investment banks such as Merrill Lynch and Morgan Stanley.
Italian regulators are understood to be probing trades amid allegations that bin Laden has channelled money through a number of Italian brokerages in the past, while authorities in Tokyo, where bin Laden associates are known to have operated, are probing trades in options between September 3 and 14.
Swiss authorities are also understood to be focusing on an investment bank in Lugano called Al Taqwa.
"I saw put-call numbers higher than I have ever seen in 10 years of following the markets. When you see this type of activity, the first thing you do is ask yourself: 'What is the explanation? What are people worried about?' " says John Kinnucan, the principal of Broadband Research, an independent American research firm.
Though some analysts claim volatile stockmarkets and fears of a global recession could have been behind the extraordinary short-selling, the suspicion remains that someone, somewhere had inside knowledge of the attacks and sought to reap profits by dumping the shares of airlines and insurance companies.
True, the airline industry was already in trouble, but the short-selling of reinsurers is far more perplexing. Insurance stocks had been one of the brightest spots in a difficult market as rates hardened to their best level in years.
The army of investigators face a mammoth task in piecing together who was behind the suspicious trades. But tantalisingly, the paper trail could lead to new revelations about the obscure financial network of Osama bin Laden and his Al Qaeda organisation.
"It is very hard to pull something off like this and not leave some sort of paper trail," says one senior financial regulator.
Options market experts point out that trading records are transparent and that there should be a clear trail for investigators to follow, since no one can trade in options without opening a brokerage account. This is no easy task and can take months.
"The fact of the matter is that if an international bank in London is dealing on behalf of a bank in the Far East who is dealing for an Arabic client in the Middle East through an introducing broker, that such a trade in all its levels would be traceable," says one trader.
What is certain is if the terrorists or their associates did try to profit by short-selling they will have attempted to cover their tracks - this could have included using an executing broker, often small brokers which parcel together trades on behalf of a number of clients, to place the trades through a long network of different banks.
"We are dealing with intelligent operatives who will be trying to find the weakest link in the chain," says one options market expert.
That weak link could be the use of shadowy trusts in offshore financial centres such as the Cayman Islands and Bermuda.
These trusts may be owned by legitimate front companies. Though money-laundering regulations have been tightened in the past decade, international investigators still do not have the armoury of weapons to block the movement of terrorist and organised crime funds.
Bankers say that until the 1990s it was relatively easy to move illicit finds through the international financial system. One key new move has been the introduction of "Know Your Customer" rules which require banks to know the true identity of their customers including companies even in tax havens such as the British Virgin Islands.
But as bankers point out, these rules are not always strictly applied, especially in offshore centres. Ironically, the US Congress refused to tighten the Know Your Customer Rules in 1999, claiming it was a threat to civil liberties.
In normal circumstances these tax havens would protect the identity of their clients at all costs from outside regulators. But in these times, it is likely that any tax haven, no matter how secretive, would hand over any information about accomplices of bin Laden, or face the wrath of the US.
Even if investigators do track the trail to offshore financial centres, there will still be difficulties in unravelling a web of front companies which are commonly used by secret financial organisations.
According to testimony by Jamal Ahmed al-Fadl, effectively bin Laden's former chief financial officer, the bin Laden network used 80 front companies to conceal its activities. These are thought to include Wadi al-Aqiq, a corporate shell in Sudan, Taba Investment, a currency trading firm, and Laden International Company, an import-export business.
A web of secret numbered Swiss bank accounts are thought to have been used as well as accounts in Sudan, Hong Kong, Monaco, Pakistan, Malaysia and London.
Last week Barclays Bank confirmed that it had frozen one account which is believed to have been in the name of Khalid al-Fawwaz, a Saudi Arabian who is on remand in Britain's Bellmarsh prison and is fighting extradition to the US.
The United States has been attempting to throttle bin Laden's finances since 1998, but has so far struggled to pin down the movement of his assets around the world.
One of the biggest problems is thought to be the group's use of a secure network of financial brokers operating an informal money transfer system known by the Hindi name hawala.
The network transfers money through a complicated barter system, relies on personal contacts and allows payments to be made in one place in return for cash being provided in another location.
No one doubts that the investigation, which is headed by the the US Treasury, is the biggest ever attempt to hunt down and smash apart a secretive financial network.
If it succeeds it may reveal just whether bin Laden and his associates not only had the audacity to pull off the world's worst terrorist atrocity, but also make unbelievable profits by short-selling the markets.
City nears 'all clear' on pre-carnage trades
By George Trefgarne, Financial Correspondent (Filed: 25/09/2001)
THE Financial Services Authority has nearly completed its investigation into possible insider trading before the New York terrorist attacks and is on the verge of giving the City a clean bill of health.
Sir Howard Davies hopes to be able to sound the all clear this week. The news will be a relief to the City. There have been fears that terrorists used their knowledge to make profits by selling airline and insurance stocks and buying gold.
Regulators in New York have been investigating huge short selling orders - where investors gamble that shares will fall - in American Airlines and United Airlines.
In London, the Liffe futures exchange was concerned about unusual movements in options based on British Airways shares. Hundreds of FSA staff have been involved in the 10-day investigation.
They have called about half of the 8,500 financial firms regulated in the UK and asked them to check their records. The operation has been co-ordinated by Carol Sergeant, the FSA director in charge of regulation.
The FSA would not comment yesterday, but one source close to the investigation said: "Nothing really has been turned up here. For every trade there has been an explanation like a broker sell note. If there was anything behind all this, they would have found it by now." The source said: "I wouldn't say it's been a red herring."
A big chunk of Middle Eastern money is managed out of London and there were natural fears that the City might be involved in any suspicious trades. Didier Reynders, the Belgian finance minister, pointed the finger over the weekend, saying: "There are very strong suspicions in Great Britain at the moment."
The fact that no insider trading has been found may be seen as a partial vindication of existing money laundering rules, which work on the "know your customer" principle. Nonetheless, Gordon Brown has said he wants to tighten them up.
However, London is not completely off the hook. A separate investigation run by the National Criminal Intelligence Service to see if any terrorist assets are invested or managed in London is continuing.
If there is anything of which financial firms are suspicious, they must file a report to the NCIS which may then alert S0-13, Scotland Yard's anti-terrorist unit.
Well, nothing to see here. Move along.
Well, nothing to see here. Move along. "
WHAT A PILE OF CRAP!!!!!!!1
They already have what they need to know, and what they know they don't want publicized, just like the xlintoooon investigations.
The tracking of options trading is very transparent. Even when it comes to Tyson chicken's commodities lawyer turning hitlery's $1000 into $100,000, it's not hard to do.
The failure to identify those that actually participated in this extraordinary trading in certain airlines and insurance companies marks a blatant COVERUP.
Who are these very protected people???? The media will not tell us; isn't that interesting!
This is the dumbest thing I've ever heard. Could this also point to the possibility that it was someone other than a bunch of cave dwelling Afghanis who orchestrated this attack? Not an option?
No, of course not. Repeat the mantra:
BIN LADEN IS THE DEVIL
BIN LADEN IS THE ENEMY
BIN LADEN MUST DIE
Nobel Committee announces Peace Prize winner A controversial choice for centenary? OSLO. 12 Oct 2001
Lawyers file appeal for convicted bomber Questions about Lockerbie evidence. CAMP ZEIST. 15 Oct 2001
China hosts APEC summit Asia debut for new US president. SHANGHAI. 20-21 Oct 2001
|Former U.S. official Schultz sees Saddam's hand|
http://www.reuters.co.il/news2000/N2SAYBC3.HTM SEATTLE, Oct 10 (Reuters) - Former U.S. Secretary of State George Schultz said on Wednesday he believed Iraqi President Saddam Hussein probably helped hijackers crash four U.S. jetliners on Sept. 11, killing more than 5,000 people. "I would be surprised if Saddam Hussein's fingerprints were not in some ways on this," Schultz told hundreds of investors gathered for a conference hosted by Charles Schwab Corp. . Schultz, who served as President Ronald Reagan's Secretary of State and also worked in the Eisenhower and Nixon Administrations, said he had no access to current U.S. intelligence reports, but added he strongly suspected the Iraqi leader of supplying terrorists. "An Iraq ruled by Saddam Hussein is basically a K-Mart for terrorist weapons," Schultz said, citing reports that Saddam has tried to develop weapons of mass destruction. Schultz also voiced support for Israel as well as U.S. efforts to broker peace deals between Israel and neighboring states. "Israel is a democracy in a sea of authoritarian ... rule," Schultz said, adding that the "holy places" in Israel revered by Christians, Muslims and Jews should be "run by ... holy people." Schultz also deflected criticism of U.S. allies Egypt and Saudi Arabia, which have voiced only cautious support for U.S. efforts to hunt down the alleged masterminds of the Sept. 11 attacks, including exiled Saudi millionaire Osama bin Laden. The Saudi and Egyptian governments have collaborated with U.S. officials as much as can be expected, given the serious dangers of radical insurgencies in their own countries, Schultz said. ((--Seattle bureau, firstname.lastname@example.org, 206-386-5339)) 10 OCT 2001 20:03:42
A good example of this is the tie-in of the CIA and the opium/heroin trade. A close reading of all this literature shows that the CIA acted like the paid-off cop on the beat. The real villians were those in organized crime whose names are never mentioned in the media. Can anyone guess why this is?
Bin Laden's family owns a multi-billion dollar construction firm in Saudi. It would be expected that he would grow up in an environment where sophisticated financial dealings were happening all the time
A stock option is something that gives you the right, but not the obligation, to buy or sell a certain amount of stock at a certain price. The option expires by a certain date.
As an example, on Friday 9/7, Boeing was trading at $44.85/share. You could buy a "put" option to sell Boeing at $50/share. The cost of the option was $5.40. If you had the option contract in hand, you could buy Boeing at 44.85 and turn around and sell it at 50, for a profit of $5.15/share. But this would not be attractive, since the price of the option ($5.40) was more than the profit you would make.
But, if you bought that option on 9/7/2001 and exercised it on the next trading day after WTC, you would make a BIG profit
On 9/17/2001, Boeing closed at $35.80. Anybody who bought an option on 9/7 would have been able to buy Boeing at 35.80 and sell it at 50.00, for a gain of $14.20.
Anybody who bought an option for $5.40 on 9/7 would have almost TRIPLED his money
There was a HUGE amount of option activity in Boeing on 9/7
Anyone who knew that several Boeing planes were about to play kamakazi could predict that a long-term fall in airline travel would mean that airlines were not going to be buying new planes anytime soon.
I would be very interested to find out who the people were who were doing all that option trading on 9/7
Logic dictates that if this crime is not exposed the coverup encompasses some of our very elite financiers.
That's what I'm worried about too. I work in the financial industry. This stuff sticks out like a magnesium flare at midnight, yet we don't see much on it, outside of a couple of bits in the finacial press.
This indicates that the people who benefited from the advance knowledge are people who cannot be touched.
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