Navinder Singh Sarao, a 37-year-old working out of a modest suburban London home
London - AFP
A British judge on Wednesday ruled that a British financial trader accused of manipulating markets and causing the 2010 "Flash Crash" in US stocks can be extradited to face trial in the United States.
Navinder Singh Sarao, a 37-year-old working out of a modest suburban London home, allegedly made millions of dollars with a computer programme that could automatically manipulate prices.
British interior minister Theresa May has to formally authorise the extradition and Sarao's lawyers said they would appeal if she does so.
A grand jury in Chicago indicted Sarao last year, accusing him of earning $40 million (36 million euros) 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 email cited in the indictment, he complained of the slowness of the programme, 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 made and then modified bogus orders thousands of times in a short period, ultimately cancelling them without ever executing any. At the same time he raked in $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 programmes for trading. He also brushed off warnings that his activity was illegal and continued to trade.
The indictment set 22 counts of wire fraud, price manipulation and spoofing against Sarao.
Sarao was arrested in London in April and was granted bail in mid-August.