UK trader charged by US over Wall Street 'flash crash'

A lone British trader has been charged by US authorities with contributing to the infamous 2010 "flash crash" on Wall Street that wiped billions of dollars off the value of US companies within minutes.

Navinder Singh Sarao, 36, from Hounslow, west London, will appear at Westminster magistrates' court today. He is accused of making $40m over five years by deliberately pushing down the value of leading US shares using illegal trading tactics.

The US Department of Justice wants to extradite him on charges of wire fraud, commodities fraud and market manipulation.

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE

Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up

The US Commodity Futures Trading Commission, which has filed a separate civil claim, has accused him of using an algorithm to flood trading platforms with fake orders, known as spoofing.

"When prices fell as a result, Mr Sarao allegedly sold futures contracts, only to buy them back at a lower price. Conversely, when the market moved back upward as the market activity ceased, Mr Sarao allegedly bought contracts, only to sell them at a higher price," said the commission.

According to the criminal complaint, Sarao also set up a corporate entity on the Caribbean island of Nevis in April 2010 with the firm name Nav Sarao Milking Markets.

He is currently being held by the Metropolitan Police extradition unit.

It is believed to be the first legal action taken against any individual in relation to the flash crash on 6 May 2010, when the Dow Jones industrial average dropped by nearly 1,000 points in 20 minutes.

Prosecutors claim Sarao was "exceptionally active" and trying to push down the shares for nearly two hours before they collapsed.

"Although the major indexes recovered most of the losses, the event was blamed for shaking the confidence of ordinary Americans who put their savings into the stock market," says the New York Times. Five years later, news of Sarao's arrest has "raised anew concerns about how an individual could manage to exert such influence over the world's financial markets", says the newspaper.