PIO trader arrested in UK over 2010 Wall Street ‘flash crash’
Navinder Singh Sarao, 36, was arrested by British authorities yesterday at the request of the US Department of Justice which wants to extradite him on charges of wire fraud, commodities fraud and market manipulation. Separately, US regulators filed civil claims against Sarao, adding that he made $40 million over five years. Sarao was charged in a federal criminal complaint in the Northern District of Illinois in February 2015.
The complaint charges him with one count of wire fraud, 10 counts of commodities fraud and commodities manipulation and one count of “spoofing”, a practice of bidding or offering with the intent to cancel the bid or offer before execution. It is claimed the trader, from Hounslow in west London used automated computer programmes to manipulate share prices. Scotland Yard confirmed Sarao was arrested by the Met’s extradition unit. Sarao appeared before Westminster Magistrates’ Court, where he opposed his extradition to the US. Wire fraud is punishable by a maximum 20 year sentenced in the US, while commodities manipulation and spoofing is subject to a possible punishment of a $1 million fine or a sentence of up to 10 years.
The infamous flash crash saw US markets plunge rapidly, only to then rebound just as quickly. Regulators blamed high-frequency traders placing multiple sell orders. High-speed trading is where share dealers create computer algorithms to buy and sell stocks in milliseconds. The US Justice Department in a statement said that “Sarao’s alleged manipulation earned him significant profits and
contributed to a major drop in the US stock market on May 6, 2010”.
On that date, the Dow Jones Industrial Average fell by approximately 600 points in a five-minute span, following a drop in the price of E-Minis. “By allegedly placing multiple, simultaneous, large- volume sell orders at different price points — a technique known as ‘layering’ — Sarao created the appearance of substantial supply in the market,” the statement said.
Sarao Opposes extradition
Indian-origin futures trader Navinder Singh Sarao on Wednesday opposed his extradition to the US. He appeared before the Westminster Magistrates’ Court which granted him bail for £5.1 million. Sarao told the court that he opposed his extradition to the US. “This has come as a bolt from the blue for Mr Sarao,” his lawyer Joel Smith told the magistrates’ court.
Sarao, donning a yellow sweatshirt and white tracksuit bottoms, was asked by District Judge Quentin Purdy if he consented to his extradition, to which he replied: “No.” Sarao’s opposition to extradition paves the way for a long legal battle.