Reply #16: Incomplete research

[HamdenRice]

The odd thing is his did not actually liquidate the funds until 09/18/01. You would think a savvy trader would have timed the liquidation correctly.

Wrong. Elgindy apparently did not anticipate that the 9/11 attacks caused the stock exchanges to be closed from 9/11 to 9/17. Therefore his timing was off by hours not days --ie he should have placed his order earlier in the day on 9/10. Once his broker missed the closing bell on 9/10, the earliest the trade could be executed was 9/18, which was what happened. There is a great deal of evidence that many people in the Arab-American community, especially in New York, had heard rumors that an attack was imminent, but not rumors of the exact date, so just because he got the timing wrong doesn’t mean he didn’t have foreknowledge of some kind.

When the prosecutors tried to raise this as an issue they had zero evidence that it was true. That's why a few judges have not allowed the subject in court.

Wrong. Please show us the prosecutors files that demonstrate that he had "zero evidence."

The prosecutors apparently first raised this issue in a court hearing concerning whether Elgindy was a flight risk, and the judge did not allow the prosecutors to introduce evidence on this topic, but that doesn’t mean they had “zero evidence.” In fact, the U.S. attorney in charge of the prosecution of Elgindy, Ken Breen, had specialized in terrorist financing, and in particular, investigating capital markets profiteering based on anticipation of the 9/11 attacks. My guess is that the judge did not allow the prosecution to introduce evidence of 9/11 foreknowledge because it was irrelevant and prejudicial in the case that the government eventually brought – namely insider trading, fraud and extortion. The judge simply said to the prosecutor, you may not introduce any evidence of terrorism, terrorist financing or 9/11 foreknowledge in this case – not that there was no evidence.

I haven’t been able to find a version of the unsealed documents that allege Elgindy’s foreknowledge in a form that will open on my computer, but it appears that that allegation was based on: Elgindy’s long time involvement with organizations that finance terrorism; certain cryptic messages linked to Elgindy on financial chat boards about imminent bio-terrorism and other terrorist attacks; and Elgindy’s attempt to liquidate the trust fund on 9/10 along with the comments he made to his broker as he placed that his order -- that a 2/3 crash of the Dow was imminent.

I believe he was convicted of more than just insider trading.

My mistake. It was insider trading, fraud, conspiracy and extortion. Considering the total amount of damage that the government alleged as around $9 million, and that the companies Elgindy targeted were themselves mostly fraudulent issuers of penny stocks, and that Elgindy claims he believed he was assisting the FBI, it still seems to be an excessive sentence. There is some evidence that the court went beyond the federal sentencing guidelines in imposing the sentence.

Perhaps there should some evidence besides an over-zealous prosecutor before you start speculation. Also how come the rouge FBI guy did not cash in on the 9/11 information?

Not clear what you mean here. The evidence is not just some “over-zealous prosecutor.” There are published reports that Jeffrey Royer, the “FBI guy” testified that he participated in Elgindy’s ring to “prevent 9/11,” but I haven’t been able to find the original documents.


But your questions seem to miss the question I was asking, perhaps because it was not in the OP but downthread. It’s that the Elgindy case seems to show that the 9/11 Commission didn’t investigate or actively covered up the source of the puts and other unusual financial activity. Their explanation is on its face absurd. The 9/11 CR’s explanation basically boils down to two points: some of the activity was the result of a newsletter and some American Airlines puts were in connection with a purchase of shares by an institutional investor.

Anyone with any understanding of the financial markets would have gone further: What newsletter? Was it Elgindy’s? That’s the question I was asking for research help on.

Who were the institutional investors and what information did they have? Why was the institutional investor who bought AA stock hedging (ie protecting himself against a collapse) by buying puts? Their explanation that because an investor was buying shares, it could not have been based on foreknowledge is absurd.

Although involved on one hand with penny stocks, Elgindy had a big audience of institutional investors who read his alarms about an impending collapse of the markets. They are focusing on who made the trades rather than on the source of the information. As JR points out up thread: why did they only look into a tiny fraction of the trades?

The fact that a guy who the feds suspected of terrorist financing, a guy who was accused of having foreknowledge of the 9/11 attacks, a guy who was an FBI informant and was working with a rogue FBI agent, was putting out in the market catastrophic sell signals in the days before 9/11 would be of interest to me if I were on the 9/11 CR staff investigating unusual sell side financial activity in the days before 9/11.

I wonder why it wasn't?