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Suspicious_Trading_Activity

"I saw put-call numbers higher than I've ever seen in 10 years of following the markets, particularly the options markets. When one sees this type of activity, the first thing one does is ask oneself, ‘What is the explanation? What are people worried about?" - - John Kinnucan, a principal of Broadband Research

 

Summary:
In the days and weeks prior to the terrorist attacks of September 11 there was a flurry of suspicious trading activity in several of the financial markets. Several of these trades ended up generating enormous profits as a result of the volatility that followed the destruction of the World Trade Center towers. As the evidence below clearly demonstrates, these trades could not possibly have been coincidental. Rather, it is clear that people with very specific foreknowledge of the attacks, placed these trades. Immediately after the horrific attacks, several reports published in the mainstream news and financial presses noted that these attacks indicated a very clear case of insider trading. One year later however, the questions surrounding these sinister trades remain unanswered.
Related Outlines:

U.S. Intelligence and the Terrorists
Explicit warnings of imminent terrorist attacks
U.S. Intelligence pre-9/11 investigations
Knowledge that planes might be used as missiles
Suspicious pre-9/11 Trading Activity
Evidence suggesting CIA likely had penetrated al Qaeda
Hijackers who were under surveillance before 9/11
Impediments to investigating al Qaeda prior to 9/11
What US officials claimed to have known pre-9/11
Acknowledgments that US had significant pre-9/11 intel.
What was the government doing on 9-11?
Unresolved issues that need to be explained
Did Bin Laden meet with CIA agents in July of 2001?
911 and D.B. Alex. Brown, Inc.
Possible Israeli foreknowledge of Sept. 11 attacks
Pre-9/11 foreshadowing of war in Afghanistan
Pakistani ISI, the CIA and 911
Previous Cases of Fabricated Evidence
Reluctance to Investigate
Independent Commission
Criticisms of 'Conspiracy Theories'
Mainstream Skepticism

 

Table of Contents

1        Suspicious trading activity.

a         Summary.
b         Examples.
c         Places where these trades were executed.
d         Were the unusual trades being monitored by the CIA
e         Investigation of suspicious trading
f          Some comments denying that the unusual trading activity was a result of insider trading.
g         Some comments suggesting that the unusual trading activity was a result of insider trading.

2        Illegal transactions were processed through computers in the World Trade Center immediately before and after the attacks.

a         Summary

 

 

 

Last Updated:  9/25/2003

1        Suspicious trading activity.

a         Summary.

i     Prior to the terrorist attacks, an unusually large amount of put options were placed on the stocks of companies whose business would be severely upset by the attacks, including the parent companies of United and American airlines, Morgan and Stanley, Merrill Lynch, Germany’s Munich Re, Switzerland’s Swiss Re, AXA of France, as well as several others.  All of these stocks suffered dramatic losses when the markets reopened.  Estimates of the profits made from these trades range from $100 million to as much as $15 billion.   [The International Policy Institute for Counter-Terrorism 9/21/01; Centre for  Research on Globalisation 4/21/02; From the Wilderness 4/22/02]
 

What is a put option?
 A put option is a contract that gives the holder the right to sell a specified number of shares (usually 100) of a particular stock, stock index or dollar face value of bonds, at a predetermined price--called the "strike price"--on or before the option's expiration date. For this right, the holder (buyer) pays the writer (seller) a premium. The holder profits from the contract if the stock's price drops. If the holder decides to exercise the option (as opposed to selling it), the writer must buy the security. The writer profits when the underlying security's price remains the same, rises or drops by less than the premium received. - - Bank One Glossary

 

b         Examples.

i     Stocks of airline companies whose planes were used in the 9-11 attacks

(A)   United Airlines put options/short selling.

(1)     Increased volume during the days and weeks prior to 9-11

(a)     The Associated Press reported: “On Sept. 6-7, when there was no significant news or stock price movement involving United, the Chicago exchange handled 4,744 put options for UAL stock, compared with just 396 call options -- essentially bets that the price will rise.” [Associated Press, 9/18/01]

(b)     According to the San Francisco Chronicle, data released on September 21 revealed that short trading in shares of the parent company of United Airlines during the month of September had risen 40 percent over its previous month's levels, while that of its competitors, excluding American Airlines, only rose 11 percent.  During the same time period, shorting among all other stocks traded on the exchange increased by only one percent.  [San Francisco Chronicle, 9/29/01]

(2)     Estimated profits from insider trades.

(a)     In the days after the attacks, the stocks of these companies dropped dramatically. Don Radlauer, an expert in electronic banking and cash management, wrote soon after the attacks, “Assuming that 4,000 of the options were bought by people with advance knowledge of the imminent attacks, these ‘insiders’ would have profited by almost $5 million.” [The International Policy Institute for Counter-Terrorism 9/21/01]

(3)     Brokerage firms through which the trades were conducted.

(a)     Alex Brown Inc, of Deutsche Bank.

(i)    The Independent of London reported that to “the embarrassment of investigators, it has also emerged that the firm used to buy many of the ‘put’ options . . . on United Airlines stock was headed until 1998 by ‘Buzzy’ Krongard, now executive director of the CIA.” The paper explained, “Until 1997, Mr Krongard was chairman of Alex Brown Inc, America's oldest investment banking firm. Alex Brown was acquired by Bankers Trust, which in turn was bought by Deutsche Bank. His last post before resigning to take his senior role in the CIA was to head Bankers Trust – Alex Brown's private client business, dealing with the accounts and investments of wealthy customers around the world.” [Independent, 10/14/01]

(ii)    On September 29, the San Francisco Chronicle reported that a “source familiar with the [United] trades and market data” identified “Deutsche Banc Alex. Brown, the American investment banking arm of German giant Deutsche Bank, as the investment bank used to purchase at least some of the options.” The same source told the newspaper, “Investors have yet to collect more than $2.5 million in profits they made trading options in the stock of United Airlines before the Sept. 11 terrorist attacks.”  Rohini Pragasam, a spokeswoman of that bank, reportedly declined to comment. [San Francisco Chronicle, 9/29/01]

(iii)    Tom Flocco, an independent investigative journalist, reported on July 16, 2002, “European reporters found that most of the suspicious pre-attack trades passed through Deutschebank and especially via CIA Executive Director A.B. Krongard’s former Alex Brown investment division by means of a procedure called portage, which assures the anonymity of individuals making the transactions. But Congress has not publicly revealed whether they will call Krongard and other Alex Brown traders to testify in open hearings, or whether they will subpoena the pre-attack documents in question.” [Flocco 7/16/02]

(B)    American Airlines put options.

(1)     Increased volume during the days and weeks prior to 9-11

(a)     The Associated Press reported: “On Sept. 10, an uneventful day for American, the volume was 748 calls and 4,516 puts, based on a check of option trading records.”  [Associated Press, 9/18/01]

(b)     According to the San Francisco Chronicle, data released on September 21 revealed that short trading in shares of the parent company of American Airlines during the month of September had risen 20 percent over its previous month's levels, while that of its competitors, excluding United Airlines, only rose 11 percent.  During the same time period, shorting among all other stocks traded on the exchange increased by only one percent.  [San Francisco Chronicle, 9/29/01]

(c)     On September 10, the volume of trading in AMR put option contracts increased to 60 times the daily average and almost five times the total of all $30 put options traded before September 10.  [The Age 9/24/01; Bloomberg  9/18/02]

(2)     Estimated profits from insider trades.

(a)     In the days after the attacks, the stocks of these companies dropped dramatically. Don Radlauer, an expert in electronic banking and cash management, wrote soon after the attack, “[A]ssuming that 4,000 of these options trades represent ‘insiders,’ they would represent a gain of about $4 million.”  [The International Policy Institute for Counter-Terrorism 9/21/01]

(C)   Statistics for both United and American.

(1)     Bloomberg News reported, "Trading in so-called put options, which rise in value when stock prices fall, surged as much as 285 times the previous average volume in AMR [parent company for American Airlines] and UAL during the days before Sept. 11."  [Newsday 9/23/01; Bloomberg 9/19/02]

 

ii     Unusual trading in the stocks of companies that were tenants in the World Trade Center

(A)   Morgan Stanley Dean Witter & Co.

(1)     General information.

(a)     It is an investment bank that had occupied 22 floors in the World Trade Center.

(2)     Increased volume during the days and weeks prior to 9-11

(a)     The Independent of London reported that “In the first week of September, an average of 27 put option contracts was bought each day” for shares of Morgan Stanley. “The total for the three days before the attacks was 2,157." [Independent, 10/14/01]

(3)     Estimated profits from insider trades.

(a)     In the days after the attacks, the stocks of these companies dropped dramatically. Don Radlauer, an expert in electronic banking and cash management, wrote soon after the attack, “Assuming that 2,000 of these options contracts were bought based upon knowledge of the approaching attacks, their purchasers could have profited by at least $1.2 million.”  [The International Policy Institute for Counter-Terrorism 9/21/01]

(B)    Merrill Lynch & Co.

(1)     General information.

(a)     A major bank whose headquarters were in the World Trade Center.

(2)     Increased volume during the days and weeks prior to 9-11

(a)     The Independent of London reported that Merrill Lynch, reportedly “saw 12,215 put options bought in the four days before the attacks, when the previous days had seen averages of 252 contracts a day.” [Independent, 10/14/01]

(3)     Estimated profits from insider trades.

(a)     In the days after the attacks, the stocks of these companies dropped dramatically. Don Radlauer, an expert in electronic banking and cash management, wrote soon after the attack, “Assuming that these trades had been ordered by people with foreknowledge of the attacks, these "insiders" would have made roughly $7 million.”  [The International Policy Institute for Counter-Terrorism 9/21/01]

(C)   Statistics for both Morgan Stanley and Merrill Lynch.

(1)     Trading volume in Morgan Stanley and Merrill Lynch put options surged "12 times to more than 25 times" in the days preceding the Sept. 11 attacks. [Bloomberg  9/18/02; 9/19/02]

 

iii     Unusual trading in the stocks of a reinsurance company which lost billions as a result of the 9/11 attacks. 

(A)   Reuters [Reuters, 9/20/01] reported that according to German bankers, there had been “brisk activity” in the trading of shares of Munich Re during the weeks leading up to the attacks.  The company announced in late September that is stood to loose about $1.95 billion as a result of 9/11.  Its shares also fell significantly lower after the Sept. 11 tragedy.  [Dow Jones Business News, 9/20/01]

 

iv     The stocks of numerous other companies may also have been traded by people possessing advanced knowledge of the attacks.

(A)   The Securities and Exchange Commission published a list that included the names of some 38 companies whose stocks may have been traded by people with advance knowledge of the Sept. 11 attacks.  In addition to the companies already mentioned above, the list included General Motors Corp., Raytheon Co, Boeing, Lockheed Martin, Lehman Brothers; Bank of America, Marsh & McLennan, Continental, Delta, Northwest, Southwest, US Airways, Carnival Cruise Lines, Royal Caribbean Cruise Lines, American International Group, AXA, Chubb, Cigna, CNA Financial, John Hancock and MetLife, American Express, Bank of New York, Bank One, Bear Stearns, Citigroup, Hercules, L-3 Communications Holdings, LTV Corp., Lone Star Technologies, Progressive Corp., Royal & Sun Alliance, XL Capital and W.R. Grace.  [San Francisco Chronicle 10/3/01; AP 10/3/01; AP 10/4/01]


 

v     Suspicious trading also occurred in the bond market

(A)   The Wall Street Journal [Wall Street Journal, 10/2/01] reported, “Investigators from the U.S. Secret Service contacted a number of bond traders regarding large purchases of five-year Treasury notes before the attacks, according to people familiar with the probe. The investigators, acting on a tip from traders, are examining whether terrorists, or people affiliated with terrorist organizations, bought five-year notes, including a single $5 billion trade, the people say.”  The Journal added, “Five-year Treasury notes are among the best investments in the event of a world crisis.”

 

c         Places where these trades were executed.

i     Countries.

(A)   Singapore, Hong Kong, Italy, France, Switzerland, the Netherlands, Great Britain, Germany and Canada.  [Centre for  Research on Globalisation 4/21/02]

 

ii     Brokerages.

(A)   TD Waterhouse, NFS, Alex Brown/Deutsche Bank, Goldman Sachs, Lehman Brothers, and several others.  [Centre for  Research on Globalisation 4/21/02; CBS News, 9/19/03]

 

d         Were the unusual trades being monitored by the CIA?

i     General

(A)   From the Wilderness magazine noted, “It has been documented that the CIA, the Israeli Mossad and many other intelligence agencies monitor stock trading in real time using highly advanced programs reported to be descended from Prosecutor’s Management Informational System (PROMIS) Software.  This software can be used to alert national intelligence services of irregularities in the markets that might predict attacks such as the ones that happened on 9-11.  Promis was reported as recently as June 2001 to be in Osama bin Laden’s possession , and as a result of recent stories by FOX, both the FBI and the Justice Department have confirmed its use for the U.S. intelligence gathering through at least this summer.  This would confirm that the CIA had additional advance warning of imminent attacks.” [Quoted from From the Wilderness Timeline, n.d..  Detailed info on Promis Software available at From the Wilderness 5/24/01; From the Wilderness 12/06/01)

 

ii     Evidence of use.

(A)   The Canadian daily reported that U.S. authorities apprehended many of the suspected terrorists “through use of the state-of-the-art computer software program PROMIS.” [From the Wilderness 12/06/01]

 

iii     CIA Denial.

(A)   Tom Flocco reported that CIA spokesman Tom Crispell denied that the CIA was monitoring U.S. equity markets trading activity in real-time prior to September 11 using PROMIS or the Echelon international satellite monitoring system. But with regards to the monitoring of foreign markets the spokesmen explained, “I have no way of knowing what operations are [being affected by our assets] outside the country.” [Flocco 7/16/02]

 

e         Investigation of suspicious trading

i     Securities and Exchange Commission

(A)   Harvey Pitt, chairman of the US Securities & Exchange Commission (SEC) said, “We've heard those reports about terrorists' involvement in our markets. … Our enforcement division has been looking into a variety of market actions that could be linked to these terrible acts including the subjects of the rumors.” [BBC 9/18/01]
 

ii     Federal Bureau of Investigation (FBI

(A)   Summary.

(1)     In September 2003, the FBI announced that its investigation into the pre-9/11 trades had been completed. Spokesman Ed Cogswell said the investigation had uncovered “absolutely no evidence” that those responsible for the suspicious trades had foreknowledge of the attacks. He said that the Bureau had found that most of the options trades had been carried out by bearish hedge funds. He did not provide the names of any of the funds who had profited from the attacks. Cogswell said the investigation’s findings had been based on interviews with trading professionals and other witnesses. The agency had also shared its information with the Justice Department and the SEC. [Sun Times, 9/19/03]

 

iii     New York Stock Exchange (NYSE)

(A)   It was expected by many that the Securities and Exchange Commission would conduct an investigation into the suspicious trades.  But according to John Nester, spokesperson for the Securities and Exchange Commission, the New York Stock Exchange regulates itself.  However, NYSE communications director Ray Pellecchia could not confirm that the NYSE was conducting any investigations into the suspicious trading that preceded 9-11, or that the NYSE has sent any report to the SEC with regards to this matter.  [From the Wilderness 12/06/01]  As recently as June 2, NewsMax [6/2/02] reported, "To date there has not been a public word from any agency as to whether they have snagged anyone."

 

iv     Financial Services Authority

(A)    According to the Financial Services Authority, Britain's main financial regulator, Al Qaeda was not behind the unusual trading activity “There has been a widespread suspicion that members of the al-Qaeda organization had cashed in on the US attacks, dumping airline, aerospace and insurance company shares before September 11th,” announced Market radio report, adding, “The Authority says that after a thorough investigation it has found no hard evidence of any such deals in London. An enquiry covering the other major financial centres in Europe has come to the same conclusion.” [10/17/01]

 

v     Patrick Humphris , a spokesman for the Financial Service Authority in Britain.

(A)   Immediately following attacks, the Financial Service Authority in Britain presumably investigated trades on the London Stock Exchange, the London Futures Exchange and the Petroleum Exchange, as well as direct trades between institutions.  In late Sept. 2001, Patrick Humphris, a spokesman for the Financial Service Authority, said “We have been through thousands and thousands of trades, and followed up on anything that seemed unusual.  ‘So far, we have found nothing irregular’.”

 

vi     Christian Pawlick, a spokesman for the German securities regulator, Bundesaufsicht fuer Wertpapierhandel, told

(A)   He told the Deutsche Presse Agentur on Sept. 27, 2002, “So far, there is still no indication that there were insiders at work.” [New York Times 9/29/01]

 

f         Comments and reports noting the unusual surge in put options and short-selling.

i     Sources interviewed by CBS

(A)   CBS News reported on September 16, 2001: “Sources tell CBS News that the afternoon before the attack, alarm bells were sounding over unusual trading in the US stock options market, an extraordinary number of trades betting that American Airlines' stock price would fall.. … Sources say they've never seen that kind of imbalance before. Normally, the numbers are fairly even.” [CBS News, 9/19/03]

 

g          Some comments denying that the unusual trading activity was a result of insider trading.

i     FBI.

(A)  Dennis Lormel.

(1)     In a testimony to Congress on October 3, 2001, he denied that there had been any suspicious trading activity prior to 9-11 in the financial markets.  He claimed that there were “no flags or indicators” of such insider trading and that those allegations were based solely on “rumors.”  [Centre for  Research on Globalisation 4/21/02] Despite this assertion, the FBI presumably investigated the suspicious trades until September 2003, when they publicly announced that no evidence had surfaced during the course of their investigation to substantiate suspicions that the traders responsible for the put options had foreknowledge of the attacks. [Sun Times, 9/19/03] see above for more information on the FBI investigation.

 

ii     New York Times.

(A)   September 28 article

(1)     The New York Times reported on September 28, “[C]oncerns about the airline industry had been growing for some time, and had grown worse in the days before the attack. On Wednesday, Sept. 5, a report by Reuters -- which is widely read by market professionals -- said that industry experts were predicting ‘a further deterioration’ in the airline industry's financial performance. Market pessimism increased two days later when the AMR Corporation, the parent of American and Trans World Airlines, announced that its losses for the second half of the year would be greater than forecast.  In response, brokerage firms cut their ratings for AMR and other airlines. Hotel analysts, realizing that fewer travelers meant fewer overnight stays, followed suit. The short positions and volume of put options rose sharply across the travel industry -- which has been cited repeatedly in news reports as possible evidence of illegal trading.  ‘The two airline companies that are the most closely related are American and United,’ said Paul Foster, a market strategist with BeyondTheBull.com, a market information firm. ‘I don't believe this has anything to do with the terrorists’.” [New York Times 9/29/01]

 

h         Some comments suggesting that the unusual trading activity was a result of insider trading.

i     One industry official familiar with the investigations said: "From what I'm hearing, it's more than coincidence.'' [Reuters, 9/20/01]

ii     Ernst Welteke, president of the Bundesbank, was quoted by the London Telegraph [Telegraph, 9/23/01] as saying, “There are ever clearer signs that there were activities on international financial markets that must have been carried out with the necessary expert knowledge.”  And the Miami Herald reported that according to Mr. Welteke, “his researchers came across what he considers almost irrefutable proof of insider trading.”  [ 9/24/01]  He was also quoted in the New York Times saying, “There have been fundamental movements in these markets, and the oil price rise just ahead of the attacks is otherwise inexplicable” [New York Times 9/29/01]

iii     John Kinnucan, a principal of Broadband Research, an independent telecommunications research firm, told the San Francisco Chronicle. “I saw put-call numbers higher than I've ever seen in 10 years of following the markets, particularly the options markets.  When one sees this type of activity, the first thing one does is ask oneself, ‘What is the explanation? What are people worried about?’ ” [San Francisco Chronicle, 9/19/01]

iv     Jonathan Winer, an ABC News consultant stated, “[I]t’s absolutely unprecedented to see cases of insider trading covering the entire world from Japan, to the U.S., to North America, to Europe.”  [cited in From the Wilderness 4/22/02]

v     Don Radlauer, an expert in electronic banking and cash management, pointed out, “No similar trading in other airlines occurred on the Chicago exchange in the days immediately preceding Black Tuesday.”   [The International Policy Institute for Counter-Terrorism 9/21/01]

vi     Dylan Ratigan of Bloomberg Business News, in a Sept. 20 interview on Good Morning Texas, said, "This could very well be insider trading at the worst, most horrific, most evil use you've ever seen in your entire life.  This would be one of the most extraordinary coincidences in the history of mankind if it was a coincidence." [From the Wilderness 5/16/02]

vii     Italy's defense minister Antonio Martino said, “I think that there are terrorist states and organizations behind speculation on the international markets.” [BBC 9/18/01]

 

2        Illegal transactions were processed through computers in the World Trade Center immediately before and after the attacks.

a         Summary

i     Convar, a German company specializing in data retrieval, examined the hard drives of several computers that were damaged in the WTC attacks. After the company had examined 32 computers, it was apparent that, there had been a remarkable surge in the volume and size of transactions that those computers processed on the morning of September 11.  Convar director Peter Henschel, told Reuters, “The suspicion is that inside information about the attack was used to send financial transaction commands and authorizations in the belief that amid all the chaos the criminals would have, at the very least, a good head start.”  One of the company’s employees, Richard Wagner told the news service “that illegal transfers of more than $100 million might have been made immediately before and during the disaster.”  [Reuters 12/17/01]

Significantly, it is not the U.S. government that is paying Convar to recover these records, but various credit card companies, accounting firms, and telecommunication firms.  [Reuters 12/17/01]

 

 

 

 

 

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