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'Flash crash trader' can be extradited to US, judge rules 'Flash crash trader' can be extradited to US, judge rules
(about 5 hours later)
Navinder Singh Sarao faces extradition to the US over claims he caused a $800bn (£565bn) “flash crash” in the US stock market from his parents’ house in south-west London. Navinder Singh Sarao faces extradition to the US over claims he caused a $800bn (£565bn) “flash crash” in the US stock market from his parents’ house in west London.
District judge Quentin Purdy at Westminster magistrates court on Wednesday ruled that Sarao’s alleged actions constituted a crime in the UK. District judge Quentin Purdy at Westminster magistrates court ruled on Wednesday that Sarao’s alleged actions between 2009 and 2014 constituted a crime in the UK.
The ruling means Sarao, 37, can be sent to the US to answer 22 counts of wire fraud, commodities fraud and market manipulation carrying a maximum sentence of 380 years’ imprisonment. The judgment means Sarao, 37, can be sent to the US to answer 22 counts of wire fraud, commodities fraud and market manipulation carrying a maximum sentence of 380 years’ imprisonment.
But Purdy said that while Sarao should therefore face trial in the US, he could not have been “wholly or mostly” at fault for causing markets to crash.
Sarao’s lawyer Richard Egan said: “We’re very disappointed. We definitely will be appealing. We think we’ve got a strong argument.”Sarao’s lawyer Richard Egan said: “We’re very disappointed. We definitely will be appealing. We think we’ve got a strong argument.”
Sarao was alleged to have modified computer software to “spoof” the market by placing huge orders on the Chicago Mercantile Exchange which he never intended to execute and were later cancelled. Home secretary Theresa May now has two months to consider whether Sarao will be extradited.
The US government alleges that this caused share prices to fall, allowing the lone trader to buy them cheaply and pocket the profits when they rose again. Once she has made her decision, Sarao’s legal team will have 14 days to lodge an appeal at the high court.
The 36 minute-long crash, on 6 May 2010, saw the Dow Jones industrial average plummet 998.5 points, its biggest ever intraday slump. Sarao is alleged to have modified computer software to “spoof” the market by placing huge orders on the Chicago Mercantile Exchange which he never intended to execute and were later cancelled.
Lawyers for the US government say the scheme, allegedly perpetrated from his parents’ home in Hounslow, London, made him more than £30m. Lawyers for the US government allege that this caused share prices to fall, allowing the lone trader to buy them cheaply and pocket the profits when the price of stocks rose again.
Sarao’s legal team have argued that he cannot be extradited because nothing he did constitutes a crime in the UK. The 36 minute-long crash, on 6 May 2010, saw the Dow Jones industrial average plummet 998.5 points – its biggest ever slump during a single trading session.
He has been called the Hound of Hounslow, in reference to the film Wolf of Wall Street about unscrupulous traders. The US government said the scheme, allegedly perpetrated from Sarao’s parents’ home in Hounslow, London, made him more than £30m.
Sarao’s legal team argued that he should not be extradited because nothing he did constitutes a crime in the UK.
But Purdy ruled that the allegations against Sarao would, if proven, result in a prison sentence of at least 12 months under UK laws on fraud and market manipulation.
This means that the allegations have satisfied the “dual criminality” test, under which a country seeking extradition must show that the actions of the accused are a crime in both countries.
“Emails sent by Navinder Sarao to his various programmers provide a powerful basis for concluding, absent any contradiction, that active market manipulation, including that known as spoofing, was expressly intended and was clearly known by him to be illegal,” Purdy said in his judgment.
Sarao has been called the Hound of Hounslow, in reference to the film Wolf of Wall Street about powerful and unscrupulous traders.
But Purdy said that while Sarao should be extradited, he could not have wielded such influence over the Dow Jones stock index.
“The causes of the Flash Crash are not a single action and cannot on any view be laid wholly or mostly at Navinder Sarao’s door, although he was active on the day,” he said.
He said Sarao was now facing “undeniably a life defining prospect of a most unwelcome kind”.
But he added that “there is a powerful public interest in honouring extradition treaty agreements with friendly states”.
Barry Vitou, corporate crime expert at Pinsent Masons, said the case showed the appetite in the US for prosecuting financial crime, regardless of where in the world it is alleged to have happened.“The world is an increasingly small place. The latest ruling underscores the US long arm approach to law enforcement and the UK’s willingness to go along with it.
“The takeaway is: just because you are thousands of miles away, don’t assume that your actions will escape a prosecuting agency in the US, or for that matter in the UK.
“Regulators in the UK and the US are increasingly flexing their muscles in relation to conduct happening outside of their shores. Out of sight is definitely not out of mind.”