Documents show flash crash trader's frenetic business dealings
By Sarah N. Lynch, Tom Polansek and Douwe Miedema
WASHINGTON/CHICAGO (Reuters) - The Briton blamed for contributing to the May 2010 Wall Street flash crash maintained frenetic relationships with a series of brokers, banks and software firms that appear to mirror his rapid-fire trading activity, U.S. court documents showed.
Navinder Singh Sarao, 36, was arrested in London on criminal charges this week, and authorities have sought to link his trades to the flash crash, when about $1 trillion was briefly wiped out from U.S. stock markets in a matter of minutes.
Sarao, who has been charged in separate civil and criminal complaints in the United States, was granted bail in London on strict conditions, including a 5 million-pound sterling ($7.5 million) bond. A lawyer for Sarao contacted by Reuters on Thursday declined to comment on whether the trader had yet been released on bail. He has said he opposes extradition to the United States for trial.
Court documents released Thursday in the civil complaint, brought by the U.S. Commodity Futures Trading Commission, show that the self-described insomniac appeared to juggle millions of dollars at a time through the global banking system between the British West Indies, the Middle East and Switzerland.
Operating his one-man shop from his parents' house in a working class London suburb miles from the financial district, Sarao became the first person to be charged with illegal activities related to the May 2010 rout in the U.S. equity market, which is dominated by far more sophisticated players.
He is accused of using an automated program to "spoof" markets by generating large sell orders that pushed down prices. He then canceled those trades and bought the contracts at the lower prices. [ID:nL1N0XJ34G]
Sarao's trading reaped him a roughly $40 million profit, authorities allege, though he showed few, if any signs of wealth. The drama has stunned Sarao's neighbors, who said he never drove a car or wore fancy clothes, though he apparently was not shy about his trading prowess.
In 2007, he sent an email to Doubledown Media – the now-defunct publisher of Trader Monthly – inquiring about joining the ranks of the now-shuttered magazine's "30 Under 30" list. On an average trading day, he claimed that he could make $133,000. Continued...