‘Flash Crash’ Trader Appeals Extradition to US

The flash crash event in May 2010 wiped out almost one trillion dollars from global stock markets within minutes.

The U.K. based trader who has been accused of inadvertently causing one of the greatest point moves in the history of the U.S. stock market, Navinder Singh Sarao, has challenged the decision of the British court to allow his extradition to the U.S.

Sarao has filed an appeal with the High Court in London in a last ditch attempt to prevent the possibility of him facing wire fraud and futures markets manipulation charges across the Atlantic. Back in March, his extradition to the U.S. was approved by a judge in London. With about 22 possible charges pending for Sarao in the U.S., his fortunes will now depend on the decision of the High Court.

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According to the allegations he could be facing up to 380 years. Some of the charges against Sarao purport that he has been manipulating the U.S. futures market for four years.

US DoJ: Sarao’s trading netted him $900,000 profit that day with more than $40 million over four years

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The prosecutors in the U.S. have claimed that the practice that Sarao used to trade the markets is identifiable as spoofing. In the aftermath of the ‘flash crash’ of May 2010, U.S. indices tanked around 9 per cent, with liquidity from the market rapidly disappearing as high-frequency trading shops hit the ‘stop’ button on their algos.

The Dow Jones Industrial Average shed almost 1000 points in minutes, with the bulk of the move rapidly being retraced back. The moves have also spread to the foreign exchange market and other asset classes. According to the U.S.  Department of Justice, Sarao’s trading netted him $900,000 profit that day with more than $40 million over four years while he was allegedly trading by using ‘spoofing’.

The practice involves a trader pretending to be interested to buy a certain asset at a certain price, without actually executing the trade. Spoofers have been sending and cancelling order on a given market to taunt certain actions from other traders.

According to the extradition system in the U.K., every case that is lost can be brought to the High Court for an appeal. This is not the last resort for Sarao, as even if this appeal fails he can then appeal the decision with the Supreme Court of the U.K..

 

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