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'Flash crash' trader pleads guilty to spoofing, wire fraud

A London-based trader pleaded guilty to wire fraud and spoofing on Wednesday after being extradited to the United States to face federal charges related to his alleged role in the 2010 Wall Street "flash crash."



Chicago: A London-based trader pleaded guilty to wire fraud and spoofing on Wednesday after being extradited to the United States to face federal charges related to his alleged role in the 2010 Wall Street "flash crash."

Navinder Sarao, 37, who traded futures on the Chicago Mercantile Exchange from his parents` home near London`s Heathrow Airport, appeared in a federal court in Chicago wearing an orange jail jumpsuit after losing a legal challenge to his extradition.

Speaking softly with his head down and hands behind his back, Sarao agreed as part of a plea agreement to pay the U.S. government $12.8 million he earned in profits from illegal trading.

U.S. judge Virginia Kendall said she expected Sarao would also be jailed for 78 to 97 months, based on sentencing guidelines. The maximum possible jail term for his crimes is 30 years.

Pending his sentencing, Sarao will be released on a $750,000 bond and be allowed to return to the UK, where he lives with his parents, Kendall said.

Sarao`s family members offered their homes to secure his release, and Kendall placed overseas calls to them in open court to confirm they understood the terms of the agreement.

Prosecutors alleged that Sarao used a modified computer program to "spoof" E-mini S&P 500 futures by generating large sell orders that pushed down prices. He then cancelled the trades and bought the contracts at the lower prices, according to the U.S. government.

Prosecutors contended his actions contributed to market instability that led to the flash crash on May 6, 2010, when the Dow Jones industrial average <.DJI> briefly plunged more than 1,000 points, temporarily wiping out nearly $1 trillion in market value.

The case is U.S. v. Sarao, U.S. District Court, Northern District of Illinois, No. 15-cr-00075.

 

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