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Screenshot of a breaking news alert e-mail from Q2 2017
Navinder Singh Sarao, the trader who engaged in spoofing and layering techniques when sending large value orders to electronic exchanges in Chicago and then canceling them – all from his bland and innocuous semi-detached house in Hounslow, West London, has been granted legal aid to fight extradition to the US to face trial for market abuse.
Mr. Sarao profited by £27 million, whilst also contributing to the 2010 flash crash in which the S&P 500, the NASDAQ 100, and the Russell 2000 collapsed and rebounded with extraordinary velocity, and the Dow Jones Industrial Average experienced the biggest intraday point decline in its entire history, plunging 998.5 points (about 9%), most within minutes, only to recover a large part of the loss.
Five years later, Mr. Sarao finds himself accused of abusing the markets in such a way that it contributed to the flash crash, and is being cited by the Commodity Futures Trading Commission (CFTC) in a criminal investigation which may require extradition to the US to face trial.
Mr. Sarao’s assets were frozen, and, despite having a sizable fortune, has been granted legal aid to pay for the likely very expensive, and potentially indefensible allegations against him, meaning that the British taxpayer will foot the bill.
Mr. Sarao made a High Court appearance in the UK, and stood silently in the dock as his lawyer Joel Smith said: “There are two points. The first is this – still he has failed to make his bail conditions.”
Mr Smith said, according to the Daily Mail, that a High Court hearing was scheduled for May 20, when Mr. Sarao will attempt to challenge the legality of his continued spell in prison. His lawyers say that a US asset freezing order has prevented him from raising the cash, despite the alleged illegality of the method by which he acquired said fortune.
Mr Smith continued: “As the court is aware, he is subject to a freezing order and at present its not possible for him to fund his legal representation privately.”
The report continued by stating that an affidavit issued by US authorities claims that Mr. Sarao made over £500,000 on the day of the Flash Crash, when the Dow Jones Industrial Average fell over 700 points. Within minutes it had recovered many of its losses but some experts quickly pointed the finger at high-frequency traders.
Asked by the judge about Sarao’s alleged profits, Mr Watkins said that the figure given by the US was $40 million, which equates to just under £27 million. Separately, the CFTC released details of a string of civil charges against Mr. Sarao and his company, Nav Sarao Futures Limited, in which it is alleged that Mr. Sarao made a “massive effort” to manipulate the market, “for over five years and continuing as recently as at least April 6, 2015.”