British Trader Pleads Guilty To Fraud Tied To 2010 "Flash Crash"
CHICAGO (CBS) -- A British futures trader accused of contributing to the 2010 U.S. stock market drop known as the "flash crash" entered a surprise guilty plea Wednesday afternoon during his first appearance in a federal courtroom in Chicago.
Navinder Singh Sarao, 37, now faces a maximum of 30 years in prison after admitting to wire fraud and "spoofing." The feds say he made $12.8 million while manipulating the markets between 2009 and 2014. He appeared before U.S. District Judge Virginia Kendall in an orange jumpsuit.
"How would I plead? Guilty," Sarao told the judge.
It has been 21 months since a February 2015 criminal complaint charged Sarao with wire fraud, 10 counts of commodities fraud, 10 counts of commodities manipulation and one count of spoofing. But when they finally hauled Sarao into a U.S. courtroom, prosecutors asked the judge to let him return to his home overseas. They said Sarao is cooperating with the federal government.
They want it to continue, and it "needs to be done from his home in London."
The judge ultimately agreed, setting a $750,000 bond secured by property owned by Sarao's parents and brother. During a 90-minute hearing at the Dirksen Federal Courthouse, Kendall contacted Sarao's relatives by phone to warn them of the consequences if Sarao doesn't comply with the conditions of his bond.
"You could lose your home," Kendall told them.
The judge also delayed scheduling Sarao's sentencing hearing until his cooperation is complete.
Sarao's attorney said his client suffers from Asperger's syndrome and has lived in the same bedroom in his parents' home his whole life. Sarao was arrested in London in April 2015, and the U.K. secretary of state ordered Sarao's extradition to the United States in May. Records show he tried to appeal to the U.K. High Court, and it shot him down Oct. 14. His extradition was to occur no later than Friday, according to court filings.
U.S. authorities took Sarao into custody Monday afternoon, records show. Lawyers told the judge that Sarao met agents at Heathrow Airport, showing up 40 minutes early. He has already been free on bond for 16 months, they said.
The feds have linked Sarao's misdeeds to the May 6, 2010 "flash crash," which sent the Dow Jones Industrial Average plummeting 600 points in five minutes. Prosecutors said he placed thousands of bogus orders for E-Mini S&P 500 futures contracts market on the Chicago Mercantile Exchange, artificially inflating and depressing their value. He then placed legitimate orders to take advantage of those artificial values.
On the day of the "flash crash," Sarao placed at least 85 bogus orders, which at times represented more than 20 percent of all such sell orders visible to the market, the feds say.
Though he faces a maximum sentence of 30 years, sentencing guidelines suggest Sarao is more likely to face a prison sentence of between 78 and 97 months. If he continues to cooperate with the feds, prosecutors are likely to recommend an even lower sentence.
(Source: Sun-Times Media Wire © Chicago Sun-Times 2016. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)
