A British judge approved on Wednesday a U.S. request for the extradition of a London-based trader accused of contributing to the 2010 Wall Street “flash crash” by placing bogus orders to spoof the market.
Navinder Sarao, 37, who traded on the Chicago Mercantile Exchange (CME) from his parents’ home near London’s Heathrow Airport, is wanted in the United States to face trial on 22 criminal counts of wire fraud, commodities fraud and market manipulation. He denies any wrongdoing.
“We are very disappointed,” Sarao’s lawyer Richard Egan told reporters after the ruling at Westminster Magistrates’ Court. “We think we have still got a strong argument and we will be appealing this decision.”
The decision of judge Quentin Purdy was not related to Sarao’s guilt or innocence but on technical matters such as whether the offenses of which he is accused are a crime in Britain.
The judgement has to be approved by Home Secretary (interior minister) Theresa May before the extradition can go ahead.
U.S. authorities say Sarao used a modified computer program to “spoof” markets by generating large sell orders that pushed down prices. He then cancelled those trades and bought the contracts at the lower prices, reaping a roughly $40 million profit.
His actions contributed to market instability which led to the May 6, 2010 flash crash when the Dow Jones Industrial Average briefly plunged more than 1,000 points, temporarily wiping out nearly $1 trillion in market value, they say.
While Purdy rejected Sarao’s arguments against extradition, he also cast doubt on the role the trader is alleged to have played in the crash.
“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,” the judge said in his written ruling.
However Purdy added the flash crash was just one of the 400 trading days referred to by U.S. prosecutors.
“That’s what this case was about in the first place,” Egan said of Purdy’s comments on the flash crash. “Even on this judgement which is against us at this point … the judge has confirmed that isn’t right on any level.”
Sarao remains on bail pending his appeal. The maximum U.S. sentences for the charges he faces amount to more than 350 years in prison.