Terror chiefs plunder stock market John Hooper in Berlin Sunday September 23, 2001 The Observer
The terrorist overlords who plotted the attacks on New York and Washington appear to have made a massive financial profit out of the resulting turmoil on international markets, one of the world's top bankers said yesterday.
Ernst Welteke, president of the Bundesbank, said a study by the German central bank pointed strongly to 'terrorism insider trading' in the days leading up to this month's carnage in the US.
He was speaking to reporters during a break in a European Union finance Ministers' meeting in Liege at which it was agreed that regulatory agencies in the 15 member states must work together to investigate the evidence.
'Even in the financial sector, there could be a global network [of terrorists] and we are looking into this,' said Austria's Finance Minister, Karl-Heinz Grasser.
He and his colleagues ordered that a joint report on the regulators' investigations should be ready by 16 October. Their decision provided by far the most authoritative support for persistent rumours that the terrorists could have funded their next strike with huge profits gained from the attacks.
Welteke said: 'There is lots of speculation and rumours at the moment so we have to be careful. But there are ever clearer signs that there were activities on international financial markets, which must have been carried out with the necessary expert knowledge.'
So far, doubts have centred on dealings in shares and derivatives that are based on movements in share prices. But the Bundesbank president suggested the world's commodity markets might also have been used.
'With the oil price we have seen before the attacks a fundamentally inexplicable rise, which could mean that people have bought oil contracts which were then sold at a higher price,' Welteke said. The gold market had also seen movements 'which need explaining'.
Belgium's Finance Minister, Didier Reynders, who chaired the informal EU meeting, said investigations were also under way in Belgium, France and other countries, looking for suspicious trades.
The idea of exploiting for profit the death of thousands of people might seem as bizarre as it is repulsive. But it would be all of a piece with the stated aim of the prime suspect, Osama bin Laden. In February 1998, he was instrumental in forging a new alliance of ultra-radical Islamist groups, the World Front for Jihad against Jews and Crusaders. A statement issued by the Front ordered all Muslims to obey 'God's order to kill the Americans and plunder their money'.
The emerging profiles of those accused of carrying out this month's attack show that most were highly educated men who had lived for long periods in the West and were used to dealing with state-of-the-art technology. It is by no means improbable that they had accomplices who were just as much at home on global financial and commodity markets.
All that was needed to make a fortune from the slaughter was an established relationship with a futures broker or a stockbroker. Then, orders for futures contracts, options and the 'short-selling' of shares could have been placed by telephone or, in some cases, through the internet.
The investment consequences of a catastrophic event like that on 11 September would not have been difficult to predict. The same movements have attended every international crisis in modern times. The price of gold, regarded as an investment of last resort, surges. At the same time, if the Middle East is involved, concern over petroleum supplies pushes up the cost of both crude oil and refined products.
On the day after the attacks, oil prices leapt more than 13 per cent. Gold went up by just over 3 per cent, but has carried on rising since - and by Friday's close it stood 7 per cent higher than on 10 September. A trader knowing what was about to befall America could, moreover, have magnified his profits many times on the derivatives markets.
This could be done either by dealing on margins in the futures markets (where only a fraction of the cost of the security has to be advanced) or by buying 'call' options (contracts that exaggerate the rise beyond a certain point of the prices on which they are based).
In this instance, an 'insider' would also have been able to foresee that the destruction of the World Trade Centre by jets would have disastrous effects on certain types of shares, notably those of insurance companies and airlines. This, too, could have been exploited, either through 'put' options (which move in the opposite direction to 'call' options), or by so-called 'short-selling' (a mechanism that allows investors to benefit from a fall in the shares' value).
Rumours of widespread 'short-selling' can be counted on to depress prices, and in the days leading up to 11 September the shares of three big European insurers, Axa, Munich Re and Swiss Re, all fell sharply. At the same time, the number of 'put' options on the firms' share prices rose above normal levels.
Welteke said yesterday: 'If you look at movements in markets before and after the attack, it makes your brow furrow. But it is extremely difficult to verify it.'