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'Flash crash' trader to be released on bail 'Flash crash' trader to be released on bail
(about 5 hours later)
The British financial trader accused of contributing to a multibillion-dollar stock market crash is to be released after being granted bail. The British financial trader accused of contributing to a multibillion-dollar stock market crash is to be released from prison after being granted bail while he fights extradition to the US.
Navinder Singh Sarao, 36, who was fighting extradition to the US on 22 counts of fraud and commodity manipulation, was granted bail at Westminster magistrates court on Friday morning. As a condition of his bail Sarao must remain within the bounds of the M25. The amount of his bail was reduced from £5m to £50,000. Navinder Singh Sarao, 36, who faces 22 counts of fraud and commodity manipulation in the US, was set bail of £50,000 at Westminster magistrates court.
He has been held at Wandsworth prison in London, after being denied bail following his arrest in April and losing an appeal in May.
On Friday, district judge Quentin Purdy said Sarao could be released provided he remains within the bounds of the M25 motorway. Sarao, who before his arrest lived with his parents in a modest semi-detached house in Hounslow, is also barred from using the internet for any trading.
Related: The 2010 'flash crash': how it unfoldedRelated: The 2010 'flash crash': how it unfolded
It emerged in the hearing that Sarao has funds of more than £30m, including £25.5m held in Switzerland and £5m in an escrow account controlled by his lawyers in the US. Sarao’s lawyers are trying to transfer the Swiss funds into the US account, in order to provide surety to US authorities that he will not skip bail. However, the Swiss authorities cannot release the majority of funds until 2017 at the earliest, with the exception of £5m that will be transferred to the escrow account in October. During the hearing it emerged that Sarao has funds of more than £30m, including £25.5m held in Switzerland, as well as £5m in a US account controlled by his lawyers.
Sarao, who has been diagnosed with Asperger’s syndrome, denies the charges against him. He was refused bail at an earlier court appearance in April but following a hearing on Friday was granted permission to leave Wandsworth Prison in London. Sarao’s lawyers are trying to transfer the Swiss funds into the US account, to provide surety to US authorities. However, the Swiss authorities will not release the majority of funds until 2017, apart from £5m that will be transferred to the escrow account in October.
James Lewis QC, representing Sarao, argued that his client needed to be released from jail to present evidence to an expert on his trading activities. Sarao is accused of playing a role in the so-called “flash crash” on 6 May 2010 when the Dow Jones Industrial Average plunged 600 points in five minutes. The US Department of Justice has claimed that Sarao made $40m (£25bn) by “spoofing” financial markets, using trading software to make false buy and sell orders. The court also heard that Sarao had been diagnosed as having “severe Asperger syndrome” by an expert from Cambridge University.
Lewis said the matter was “horrendously complicated”. He added: “I must admit I have not fully understood it.” Sarao’s representative said the search for legal experts to bolster his case had been difficult because of the “risible” legal aid fees on offer to expert witnesses. Lewis added that he wanted Sarao to tell an expert how he had made his trades, which was not possible from Wandsworth Prison. Sarao, who appeared in court wearing a yellow T-shirt, over a black long-sleeved top, denies the charges against him.
The magistrate, Quentin Purdy, rejected Lewis’s request to delay the extradition hearing – scheduled for 24 and 25 September – but agreed to grant Sarao bail and limited access to the internet. The British trader is accused of manipulating US financial markets and contributing to the flash crash of 6 May 2010, when the Dow Jones industrial average plunged 1,000 points in five minutes, losing 9% of its value and causing panic on Wall Street. The market soon recovered and ended the day 3% lower.
Sarao’s lawyers will have the opportunity to request a delay in the extradition hearing at a further court hearing on 28 August. The US Department of Justice alleges that Sarao earned $40m (£26m) by “spoofing” financial markets, which involved using software to place fake trades to move prices up or down.
James Lewis QC, representing Sarao, argued that his client needed to be released from jail to present evidence to a financial expert on his trading activities, as part of his defence against extradition.
Lewis said the trading was “horrendously complicated”, adding he himself had not yet fully understood it. The defence case against Sarao’s extradition had been complicated by the difficulty of finding finance professionals ready to accept the “risible” legal aid fees on offer to expert witnesses, Lewis added. However, the judge denied the defence’s request to delay the extradition hearing, which is scheduled for 24 and 25 September.
Sarao’s lawyers will have the chance at a further court hearing on 28 August to argue for more time to develop their defence.
When he appeared at the high court in May, Sarao protested his innocence: “I’ve not done anything wrong apart from being good at my job.” But in this latest court appearance, he spoke only to confirm his name and understanding of bail conditions.
Lawyers for the US government previously argued that Sarao should not be released on bail until he was able to demonstrate that he had no access to funds.
Sarao was prevented from paying £5m bail demanded in May because of a worldwide freezing order on his funds. Mark Summers QC, representing the Americans, said the US authorities would not oppose the latest application for bail, subject to conditions, including depositing the Swiss funds in an account that can be accessed only by Sarao’s lawyers.
US authorities have accused Sarao of alleged market manipulation over five years and had warned him against his activities as recently as 6 April. But they stopped short of putting all the blame on the Hounslow day trader for the flash crash, arguing that he was “a contributing” factor.
Sarao is alleged to have changed his orders on the day of the flash crash more than 19,000 times before cancelling them, and is said to have made profits of more than $820,000 during a day’s trading.
Last year, Sarao explainned his success to the UK’s Financial Conduct Authority by saying that “he had always been good with reflexes and doing things quick”.