British 'Flash Crash' trader Navinder Sarao pleads guilty in US to fraud.
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| Navindren Sarao |
The British financial trader accused of manipulating markets and causing the 2010 "Flash Crash" in US stocks pleaded guilty in a Chicago court on Wednesday to fraud charges.
Navinder Singh Sarao, a 37-year-old working out of a modest suburban home in Hounslow in west London, allegedly made tens of millions of dollars with a computer program that could automatically manipulate prices.
He was extradited to the United States on Tuesday and entered the guilty plea to one count of wire fraud and one count of "spoofing,"an illegal stock manipulation technique, in the Chicago federal district court, the Justice Department said.
"Navinder Sarao abused sophisticated technology to make a quick profit, and jeopardised the integrity of US financial markets," said Assistant Attorney General Leslie Caldwell.
"By flooding the marketplace with bogus orders, his scheme victimised countless individuals," she said.
The statement did not say what the plea deal involved, but according to Bloomberg, Mr Sarao agreed to forfeit nearly $13 million (£10 million) in gains.
Pending his sentencing, Mr Sarao will be released on a $750,000 bond and be allowed to return to the UK, where he lives with his parents, US judge Virginia Kendall said.
Ms Kendall said she expected Mr Sarao would be jailed for 78 to 97 months, based on sentencing guidelines. The maximum possible jail term for his crimes is 30 years.
Meanwhile, the US Commodity Futures Trading Commission announced it was seeking monetary sanctions of $38 million (£30 million) in the case against Mr Sarao.
A grand jury indicted the Briton last year, accusing him of earning $40 million (£32 million) through "spoofing" the market with fake orders between 2010 and 2014 to move the prices of securities like the E-Mini S&P futures contract on the Chicago Mercantile Exchange.
The indictment detailed how he built a system with the help of programmers specifically designed to help him repeatedly issue and cancel simultaneous sell-and-buy orders in key securities to make the prices go in the direction he wanted.
Emails cited in the indictment made clear he knew what he was doing.
"I need to know whether you can do what I need, because at the moment I'm getting hit on my spoofs all the time and it's costing me a lot of money," he told a programmer.
His activities were blamed for the sudden market crash of May 6, 2010, when the Dow Jones Industrial Average plunged 600 points in a matter of minutes, wiping hundreds of billions of dollars from share values.
Mr Sarao allegedly raked in $789,000 (£635,000) in profits on real E-Mini contract trades made that day.
The indictment said Mr Sarao had repeatedly rebuffed probes by regulators, insisting that he was just a fast-fingered normal trader not relying on computer programs for trading. He also brushed off warnings that his activity was illegal and continued to trade.
Mr Sarao was arrested in London in April 2015 and was granted bail after months in jail after admitting he had parked some $31 million (£25 million) in assets in Switzerland, according to Bloomberg.
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