Asia Times Online


	September 19, 2001	atimes.com

Front

Osama bin Laden: Ultimate inside trader?

Leave it to the Swiss. Already last Friday the Zurich daily Tagesanzeiger ran an article in which it asked whether the terrorists that destroyed New York's World Trade Center might have enriched themselves to the tune of billions of dollars based on their obvious foreknowledge of the attack.

How? Dead easy. Financial markets worldwide offer a whole range of derivative products allowing stock traders to limit share-price movement risk. The same instruments - such as put or call options - can, of course, also be used to bet on falling share or rising oil prices. "Someone speculating on falling share prices could, by way of [stock market] index options, in a few days have earned 30 times the amount he invested," said Kristian Leuthold, derivatives specialist at UBS in Zurich. "An investment of 100 million could easily have yielded 3 billion [Swiss francs]."

Leuthold further noted that, "If the total deal had been broken up into small lots and distributed through different middlemen, banks and markets, it would be very difficult to detect anything ... For example, an offshore corporation places an order with a small Swiss private bank. That bank, in turn, executes the derivatives deal via a large bank such as UBS. For the market-maker, only UBS shows up as the counterparty."

Securities and exchange commission investigators from Japan to Germany and the US are now looking into precisely the type of scenario Leuthold outlined in the Swiss daily. The investigative focus is the reinsurance sector, the stock price movements and trades involving insurance companies that do not directly insure individual or corporate clients but their first-line insurers. On the Wednesday, Thursday and Friday before the attacks on the US, the stock of Munich Re, the world's biggest reinsurance company, fell 4 percent, 5 percent and 4 percent, respectively. Swiss Re was similarly affected.

But, of course, the trading pattern in other industries - airlines top among them - that predictably would have been affected are also under scrutiny. Short selling would have allowed investors acting on behalf of Osama bin Laden's Al Qae'da to offer shares of stock they did not yet own at a given price in the expectation that they would be able to buy the stock at a much cheaper price than the promised sales price. Precisely how many such transactions were conducted and at what total value is not yet known and likely never will be. Even more difficult - for reasons Leuthold pointed out - will be the task of identifying investors with possible links to terrorists among the large crowd of speculators who jumped into the fray once they saw the World Trade Center burning.

But there can be little doubt that Italy's Defense Minister Antonio Martino was right when he said Tuesday that "I am convinced that ... the person who organized that attack has a lucid mind and knows very well that money gives power" and availed himself of the opportunity.

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