'Flash Crash' trader loses extradition appeal

Navinder Singh Sarao faces 22 charges in the US which carry prison sentences totalling 380 years.
Navinder Singh Sarao faces 22 charges in the US which carry prison sentences totalling 380 years.

British man fails in bid to avoid facing charges of market manipulation in US over 2010 crash

LONDON • A British financial trader accused of manipulating markets and causing the 2010 "Flash Crash" in US stocks lost his appeal yesterday against extradition to face trial in the United States.

Navinder Singh Sarao, a 37-year-old working out of a modest suburban home in Hounslow in west London, allegedly made millions of dollars with a computer program that could automatically manipulate prices. Sarao, who is on bail, was not present for the ruling.

He has been dubbed the "Hound of Hounslow" by the British tabloids and faces 22 charges in the US which carry jail terms totalling 380 years.

A grand jury in Chicago indicted Sarao last year, accusing him of earning US$40 million (S$55.5 million) through techniques including market "spoofing" - making fake orders - between 2010 and 2014.

The indictment detailed how the trader built a system with the help of programmers specifically designed to help him repeatedly issue and cancel simultaneous sell- and-buy orders in key securities to make the prices go in the direction he wanted.

In an e-mail cited in the indictment, he complained of the slowness of the program, telling the programmer that "I need to know whether you can do what I need, because at the moment I'm getting hit on my spoofs all the time and it's costing me a lot of money".

The indictment said Sarao focused on certain securities like the E-Mini S&P futures contract on the Chicago Mercantile Exchange to move prices, especially in moments of high market volatility.

"Sarao's large, bogus orders had a tendency to effect artificial movements in the E-Mini market price by creating a false appearance of substantial supply and demand," it said.

Sarao's use of the dynamic layering technique "was particularly intense in the hours leading up to the Flash Crash" of May 6, 2010, when the Dow Jones Industrial Average plunged 600 points in a matter of minutes, wiping hundreds of billions of dollars from share values.

Playing E-Minis, he allegedly made and then modified bogus orders thousands of times in a short period, ultimately cancelling them without executing any. At the same time, he raked in US$789,000 in profits on real E-Mini contract trades made that day.

The indictment said Sarao had repeatedly rebuffed probes by regulators, insisting that he was just a fast-fingered normal trader not relying on computer programs for trading. He also brushed off warnings that his activity was illegal and continued to trade.

Sarao was arrested in London in April last year and was granted bail in August.

AGENCE FRANCE- PRESSE

A version of this article appeared in the print edition of The Straits Times on October 15, 2016, with the headline ''Flash Crash' trader loses extradition appeal'. Print Edition | Subscribe