Ups and downs in the war with Iran may have been an opportunity for insiders betting on oil prices to make a killing, according to a new report.
The report from ABC News said the Department of Justice is taking a close look at several oil market trades that came just before critical moments in the war with Iran.
In four transactions under review, the Justice Department and the Commodity Futures Trading Commission are examining trades that netted more than $2.6 billion to individuals who bet oil prices would drop immediately before they did so.
From the start of the conflict on Feb. 28, the oil market has been up and down depending upon Iran’s strategy, America’s response, and expectations that oil might again flow freely.
The London Stock Exchange Group highlighted the trades, which began on March 23, when 15 minutes before President Donald Trump announced a delay on attacks against Iranian infrastructure, a $500 million bet was placed that oil prices would dip.
On April 7, only hours ahead of Trump’s announcement of a temporary halt in hostilities, a $960 million bet was placed that oil prices would fall.
On April 17, 20 minutes before Iran said the Strait of Hormuz would be opened, a $760 million bet was placed that oil prices were going to drop.
On April 21, 15 minutes before the ceasefire was extended, $430 million worth of bets was placed predicting oil prices were going down.
The Guardian noted last month that the conflict has been accompanied by unprecedented betting on events through online betting platforms, with many bets being precisely timed to events in the war.
For example, according to one complaint before the Commodity Futures Trading Commission, six so-called insiders reaped $1.2 million from betting when former Iranian Supreme Leader Ali Khamenei would be killed.
Reining this in through legislation is a complex task, if it can be done at all, one expert said.
“Is the problem that we don’t have legislation or that we don’t have enforcement capabilities?” Joshua Mitts, a law professor at Columbia University, said.
“To have a law that can’t really be enforced effectively given the technological limitations, it’s sort of putting the cart before the horse,” he said.
The oil price bets appear suspicious, another expert said.
“We can’t say from the outset whether any of these trades were illegal. Any one of them could be lucky, and any one of them could be based on lawful information,” Andrew Verstein, a law professor at the University of California at Los Angeles, said.
“But many of them bear the hallmarks of suspicious trades that would naturally warrant investigation,” he added.
Trying to regulate prediction markets will be an uphill task, Craig Holman, a government affairs lobbyist for Public Citizen, acknowledged.
“Not only the timing, but the amount of these bets makes it look very likely that someone had insider knowledge… and placed very, very substantial bets on it,” he said.
“It’s a wild west phase, when we’re talking about the prediction market industry, and now it’s spilled over into the stock market as well.”
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