British Flash Crash Trader Could Face 350 Years In U.S. Courts

By:
Chris Gaetano
Published Date:
Oct 24, 2016
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Navinder Singh Sarao, the British trader who has been accused of being partially responsible for the 2010 flash crash, has lost his extradition hearing and can now be sent to the U.S. to face trial, which could end in a jail sentence of up to 350 years, according to Fortune. The 2010 flash crash saw the Dow Jones Industrial average lose and then mostly regain nearly 1,000 points within the course of only a few minutes, an event triggered mainly by the high-speed trading computers that drive the majority of trades today.

The joint report from the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) identified as its cause a confluence of a number of factors working on concert such as the ongoing European sovereign debt crisis. Another factor, however, was Sarao, who was arrested last year in the U.K., after which proceedings began to extradite him to the U.S.

The Justice Department, in a press release following the arrest, accused Sarao of using an automated trading program to manipulate the market for E-mini S&P 500 futures contracts on the Chicago Mercantile Exchange. The criminal complaint says that he would spoof buy and sell orders he never intended to complete in order to influence prices. For this, he was charged with one count of wire fraud, 10 counts of commodities fraud, 10 counts of commodities manipulation, and one count of “spoofing.”

The 37-year-old trader is by no means a big player in the market, with a Bloomberg article on him characterizing him as little more than a day trader. However during the flash crash, according to Bloomberg, his activities made up 20 to 29 percent of all sell orders that day, replacing or modifying them 19,000 times before cancelling them in the afternoon. The DOJ says that this contributed to the conditions that eventually led to the flash crash. 

Fortune pointed out that if Sarao receives the full 350 years, it would be twice the sentence received by notorious fraudster Bernie Madoff, who is currently working off a 150 year prison sentence for running a multi-billion dollar Ponzi scheme that was discovered in the wake of the financial crisis. 

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