US prosecutors have asked a Chicago court for no additional prison time for the British futures trader blamed for the 2010 stock market drop, known as the “flash crash,” citing his substantial assistance in building cases against other spoofers.
In a court filing released Tuesday, the government said it would be appropriate for the judge to impose a sentence for Navinder Singh Sarao that does not include prison time. Federal sentencing guidelines initially called for the UK trader to be sentenced to between 78 and 97 months. The final decision on Sarao’s sentencing will be announced on January 28.
Prosecutors wrote that Navinder helped on a range of issues related to the spoofing probes, including providing firsthand information about how to detect, investigate, and prosecute electronically-driven market manipulation crimes. He also testified about the context of interactions with his former programmer, Jitesh Thakkar, who was charged with conspiring with Sarao.
“The defendant’s keen insights and explanations regarding both general and specific patterns of deceptive and manipulative trading have illuminated the government’s understanding of similar spoofing,” prosecutor Michael O’Neill wrote.
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Risks to his mental health
The memo describing Sarao’s cooperation also states he has been diagnosed with autism syndrome that makes it difficult for him to make eye contact with people. As such, the DoJ says the prison time would pose serious risks to the 41-year-old’s mental health.
“The defendant clearly was not motivated by money, greed, or any desire for a lavish lifestyle. His only significant purchase was a 5,000 pound car. Of his remaining trading profits, the defendant lost over 40 million pounds to three apparently fraudulent investment schemes,” O’Neill added.
The sentencing memo came roughly three years after Sarao agreed to plead guilty to one count of wire fraud and one count of spoofing. He was extradited to the US in 2016 to face charges over the 2010 “flash crash,” but the government dropped 20 charges against Sarao after he co-operated with the department’s fraud section, including helping the agency gain access to his funds.
Justice Department prosecutors also described Sarao in the filing as a valuable cooperator who educated regulators and enforcement agencies, including the CFTC and FBI, on the world of HFT fraud and how they place fake trades in a bid to manipulate the market.