For most of us, on both sides of the English Channel, a no deal Brexit on October 31 would be a disaster. But it has now become a bet of sorts waged by some UK politicians to see who, London or Brussels, blinks first.

Read more: UK hopes trade deal with US could soften Brexit blow

If you've ever wondered how ostensibly rational UK politicians could sanction such irresponsibility, we offer a story that may help explain.

Our story begins when Bloomberg published a report last year. Three of the agency's journalists noticed, as had others, correlations between fluctuations in the price of the pound on foreign exchange markets on the night of June 23-24, 2016 (referendum night), and the public comments made by lead leaver in the  campaign, Nigel Farage, on the same night.

Cam Simpson, investigations editor for Bloomberg, who headed the investigation, told DW that the probe exposed how a handful of powerful financiers bought access to secret, live-streaming exit polls on the day of the Brexit vote in 2016.  

"To UK lawmakers and regulators with oversight, the episode raised serious questions about insider dealing or market abuse as defined under UK and EU rules," Simpson said.

'Ridiculous,' 'risible' and 'dishonest'

A spokesperson for the Brexit Party, when asked about the report, told DW that none of the Bloomberg allegations had been proven. "Don't be ridiculous. That is almost accusing Mr Farage of criminal activity," the spokesperson said. Most of the claims were debunked and there is nothing to add to what was said at that time, the spokesperson went on. 

"The idea that there was any attempt to say anything other than how things looked at the time is both risible and I would suggest dishonest," the spokesperson added.

The facts, as we know them

It is 9.40 p.m. UK time, June 23, 2016, and Farage is waiting to appear on Sky News' referendum special when, according to the Bloomberg report, he gets a call from a pal in the polling industry. A certain Damian Lyons Lowe, whose company Survation knows already from private polling data that Leave is likely to win the referendum, tells him such.

Lyons Lowe's poll contradicts all other polls on offer to the public at the time, Bloomberg alleges. It is 20 minutes before the polling booths close. 

The Bloomberg trio note books by leave campaign financier Arron Banks and journalist Tim Shipman that put Farage in receipt of such knowledge, from "an unidentified, financial services exit poll," 20 minutes before polls closed. Farage denies this.

At 10 p.m. Sky News' Adam Boulton says the polls have closed and moments later announces a "huge" exclusive: Farage has seemingly conceded defeat.

Bloomberg sends a series of headlines to its 300,000 financial clients around the world.

At 10:52 p.m., the pound goes above $1.50 (€1.30), its highest value in six months, as markets breathe a sigh of relief.

At 11.15 p.m., Farage gives a further concession to the Associated Press, in which he cites a financial firm's exit poll as his reason for conceding. The pound stays firm over $1.50.

At 12:16 a.m., Sunderland votes for Leave and the pound plummets one minute later, hitting $1.43.

At 5:28 a.m., the pound bottoms out at $1.32. sterling has fallen 10% against the dollar.

Does a bad penny always turn up?

Some hedge funds cashed in by shorting the pound, a practice of selling shares you don't own in the hope of buying them back at a cheaper price in the future, thus generating a profit.

The main vehicle to do this is derivatives, which allow traders to benefit from even small market moves, as the market is often illiquid. Derivatives are priced to reflect market mood, so Remain sentiment after Sky's opening made short bets cheap and fueled demand. 

Read more: Boris Johnson wins legal challenge over Brexit campaign misconduct

Brevan Howard, which bought exit-polling data from ComRes, reportedly made $160 million. Bloomberg reported that Odey's founder, Crispin Odey, made $300 million. 

Farage: Profits of doom

Farage told Simpson that the only external exit poll results he received had been Survation's and that Lyons Lowe had given them to him. But, he added, this was after Sky had put his statement on the air at just after 10 p.m.

"That would have been — for he and I to have spoken ahead of that 10 o'clock — would have been wrong at every level. Wrong for me, wrong for him, just would have been wrong," Farage said.

Farage later said the news had come not from Lyons Lowe personally, but from someone affiliated with Survation's operations. He also said he had not given a formal concession.

Farage now rubbishes the idea that his "concessions" were aimed at moving the markets. "This is a crackpot lunatic conspiracy theory," he said.

The long and short of it

Pollsters have admitted that the Brexit referendum day was one of the most profitable in the industry's history. YouGov reportedly charged hedge funds $1 million. 

Read more: Brexit deal: What Germany wants, what Theresa May can get

It is illegal under British electoral law to publish exit polls before 10 p.m. on the day of an election or referendum. But hedge funds and pollsters interpreted this as allowing private provision of exit poll data to selected individuals.

"It is normal and reasonable that private companies conduct research," the Brexit Party spokesperson said. "To suggest otherwise would be a massive restriction of freedom and hugely damaging to businesses' ability to plan and protect themselves and their shareholders."

Should we be making plans for Nigel?

"I am absolutely sure there was a relationship between the hedge funds, pollsters and Nigel Farage, which seems to have resulted in substantial gains for the hedge funds and was very lucrative for Farage," UK politician George Foulkes told DW.

"And it could happen again," said Foulkes, who was head of the House of Lords' select committee that investigated the allegations of collusion. The investigation found insufficient evidence to prove collusion. 

"I wrote to the Metropolitan Police asking them to investigate, but they replied saying it was a matter for the Financial Conduct Authority (FCA), but they seem to have done nothing about it. I would have followed it up further, but pressure of other work and lack of resources prevented this," Foulkes added.

Mark Blyth, a professor of international political economy at Brown University, shared a similar view. "If there is a hard Brexit, which is massively underpriced by the markets, a similar killing could be made," he said.

"If you have a leading politician pushing in that direction, this gives the hedge funds a one-way bet, with insurance against failure. And that's the type of 'option' hedgies love the most," Blyth continued.

Most forex strategists asked by Reuters said the pound would crash if there is no deal. Now at $1.27, they said it would trade between $1.15-$1.20 within a month.

"The situation is different this time," Simpson said, given that there is not a referendum or (probably) an election. But, he believes, hedge funds will be seeking to get ahead of whatever resolution comes about on or before October 31, in a defensive or opportunistic way. "The volatility of UK politics has created volatility in its markets," he said.

People will be watching very closely, he added, if it appears that anyone with inside information seems to lead the public and its markets in the wrong direction. "Or if people close to them substantially profit by magically betting against the overwhelming market sentiment," he added.