A British man most possibly involved in a “flash crash” on Wall Street will go to the US to get his punishment – about 380 years in prison.
The Wall Street flash crash happened 6 years ago, making the shares drop $1 trillion in several minutes. One of the contributors to the illegal manipulation, according to the US authorities, is 37-year-old Navinder Sarao who is about to go to America for punishment.
Mr Sarao was a day trader, and after he was accused, a legal battle against his extradition to the US was fought and lost. Eventually, his case is going to move to the American trial, and he is going there in 28 days after the loss.
He is claimed to have made up to $40 million while working as a trader from his parents’ home. Now he is about to answer in front of the US authorities, and if convicted on the 22 manipulation charges against him, Mr Sarao is about to go to a jail for up to 380 years.
The US Department of Justice and the US Commodity Futures Trading Commission claim that the Brunel University graduate was “exceptionally active” trading in US stock market futures in the hours before the May 2010 flash crash and have alleged that his actions helped to precipitate the brief collapse in share prices.
Prosecutors allege that Mr Sarao used illegal spoofing techniques to manipulate the price of futures on the S&P 500 index of leading US shares. On the day of the crash he used these techniques to put in sell orders of between $170 million and more than $200 million as part of a scheme to place “persistent downward pressure” on the market, it is alleged.
Companies set up by Mr Sarao are alleged to have moved his trading profits offshore to tax havens. One company set up by the trader was based on the Caribbean island of Nevis and called Nav Sarao Milking Market Ltd.
Lawyers for the US government have claimed that he had also moved £25 million to Switzerland via Angola.
Mr Sarao has denied all the charges and his lawyers have argued that none of his alleged crimes was illegal under English law. Under “dual criminality” rules, lawyers for the US government only had to show that his behaviour could constitute a crime in the UK. However, British rules on market spoofing are not as clear as those in place in the US.
An expert hired during Mr Sarao’s fight against extradition also disputed that his trading could have caused the flash crash, saying that he had switched off his trading systems several minutes before the fall in shares.
The trader is likely to face trial in Chicago where the charges against him were filed in the US city’s northern district court. The Chicago Mercantile Exchange is the trading platform on which Mr Sarao is accused of carrying out his illegal activities.
Charges against Mr Sarao were originally filed in April 2015, prompting his arrest and a worldwide freeze on all his assets. The trader was at first asked to post a security with the court of £5 million to secure his release and ended up spending more than 100 days in Wandsworth prison in London, after he was unable to meet the terms of his bail.
His bail was subsequently amended and Mr Sarao was allowed to return to his parents’ home where he has since been living under curfew and with restrictions, including being not allowed to travel outside of the M25 motorway.
Yesterday, lawyers for Mr Sarao declined to make a statement after the court verdict. Mr Sarao was not present at the hearing.