London futures trader fights US extradition bid over ‘flash crash’

Trader faces very long custodial sentence if convicted in US, says prosecutor

A security van entering Westminster Magistrates’ Court in central London, believed to be carrying Navinder Singh Sarao, the futures trader facing charges of contributing to the 2010 “flash crash”. Photograph: Yui Mok/PA Wire

A security van entering Westminster Magistrates’ Court in central London, believed to be carrying Navinder Singh Sarao, the futures trader facing charges of contributing to the 2010 “flash crash”. Photograph: Yui Mok/PA Wire

 

A UK futures trader operating out of a suburban London house is fighting extradition to the United States to face fraud charges, including allegations of contributing to the 2010 “flash crash” in equity markets.

Navinder Singh Sarao (36), was arrested on Tuesday and the US authorities are seeking to extradite him to stand trial in Illinois.

The US department of justice (DoJ) has charged Mr Sarao with one count of wire fraud, 10 of commodities fraud, 10 of commodities manipulation and one of spoofing, a form of market manipulation that involves putting on an order and swiftly withdrawing it before a trade can take place.

The trader appeared at Westminster magistrates’ court on Wednesday. He stood in the dock to confirm his full name, address and date of birth in the hearing before judge Quentin Purdy.

No consent to extradition

Mr Sarao, dressed in a canary yellow sweatshirt and white tracksuit trousers, was asked to stand and tell the court whether he consented to extradition to the US to which he replied: “No.”

Defence lawyer Joel Smith told the court there would be an application for bail from his client. The events had come as “a bolt from the blue” for Mr Sarao and there had been some difficulty in contacting family members and friends, he said.

The judge was told by Mr Smith an extradition hearing would take a day and Mr Sarao had “means of his own”.

Prosecutor Aaron Watkins objected to bail, saying Mr Sarao was facing charges that carried a “very long custodial sentence” if he was convicted on one or more of the offences. He was a UK citizen and his passport had been seized, the court heard.

The registered address of the company allegedly used by Navinder Singh Sarao is in west London.

US authorities probing the 2010 flash crash have spent years trying to understand the factors behind the plunge. On Tuesday they zeroed in on a house in Hounslow, 17 miles west of the City of London.

Mr Watkins told the court that during the relevant period – June 2009 to April 2014 – the defendant was a futures trader operating from his domestic residence in the UK, through a company he set up, in futures trading using commercially available automated software.

This enabled him to place multiple orders nearly simultaneously.

He told the court that on numerous occasions between April 2010 and April 2014, Mr Sarao is alleged to have spoofed the market in an event known as the flash crash. He had been asked to desist in his activities by the US authorities but continued to do so, knowing it was wrong.

Full extradition hearing

The court ordered a full extradition hearing in August and the proceedings were adjourned to 2pm. Neither the Metropolitan Police nor the City of London police have opened a UK investigation into Mr Sarao.

In the flash crash of May 6th, 2010, shares in companies such as General Electric and Accenture traded at one cent, and thousands of trades were subsequently cancelled. The Dow Jones industrial average plunged more than 600 points in minutes.

The DoJ alleges in a criminal complaint that Mr Sarao used an automated trading program to manipulate the market for S&P 500 futures contracts, known as e-minis, on the Chicago mercantile exchange, the largest US futures market.

– (Copyright The Financial Times Limited 2015)