Trader to fight extradition plans
A British financial trader accused of helping to trigger a multi-billion dollar US stock market crash from the home he shares with his parents has told a court he will fight plans to extradite him to America.
Navinder Singh Sarao was arrested at the request of US authorities over the 2010 Wall Street "flash crash", which he allegedly helped cause from their semi-detached house 3,500 miles (5,600km) away in Hounslow, west London.
The 36-year-old is facing 22 charges including wire fraud, commodities fraud and market manipulation which carry sentences totalling a maximum of 380 years.
The US Justice Department claim Sarao and his company, Nav Sarao Futures Limited, illegally made £26 million (40 million US dollars) over five years.
In court papers lodged in America, it is alleged Sarao claimed he told US regulators to "kiss my ass" in May 2010 after they wrote to him telling him his orders must be for "bona fide transactions".
Against prosecutors' wishes, he was granted bail today at Westminster Magistrates' Court in London with conditions including that he provides a security of £5 million.
However it is thought he remains in custody as he had not been seen walking out of the court building when it closed tonight.
During his extradition hearing, British-born Sarao, a former bank worker and Brunel University student, appeared in the dock wearing a bright yellow sweatshirt and white tracksuit trousers.
Asked whether he consented to his extradition to the US, he replied: "No."
Sarao was arrested yesterday at his home by officers from Scotland Yard's extradition unit on behalf of US authorities.
District Judge Quentin Purdy said: "I suspect the last 24 hours or less have been somewhat dramatic for you. You know the US seek to extradite you to face very serious charges and put you on trial to prove that."
Judge Purdy said Sarao's bail conditions included that he lives and sleeps at his home address with an electronic tag monitoring his curfew from 11pm to 4am, surrenders his passport and the passports of his parents, reports to a police station three times a week, does not use the internet and does not attempt to leave England or Wales.
Sarao was told he must provide a security of £5 million - the amount he has in his trading account, of which £4.7 million is a loan - along with a security of £50,000 from his parents, which they would lose if he failed to answer bail without good cause.
Judge Purdy added that Sarao would not be released until his bail conditions were met.
Sarao faces 22 charges in the US state of Illinois, prosecutor Aaron Watkins told the court. They include 10 counts of commodities fraud, each of which carry a sentence of 25 years and a single count of wire fraud, which carries a sentence of 20 years. He also faces 10 counts of commodities manipulation and attempted commodities manipulation, and one count of "spoofing" - a practice of bidding or offering with the intent to cancel the bid or offer before execution - with each charge carrying a maximum sentence of 10 years.
Mr Watkins said: "During the relevant time period, which was from June 2009 to April 2014, the defendant was a futures trader operating from his domestic residence here in the UK, trading primarily through a company he set up.
"He has committed these crimes over a period of time.
"It is said he was asked to desist from these activities by the US authorities but failed to do so, knowing it was wrong. The figure (the US) are saying in their request is to the value of £26 million - 40 million dollars."
Sarao's defence lawyer Joel Smith told the court that criminality was "not accepted in this case".
"This is a matter that has come as something of a bolt from the blue for Mr Sarao," he said.
Sarao is accused of using an "automated trading programme" to manipulate the market for futures contracts on the Chicago Mercantile Exchange.
His alleged manipulation earned him significant profits and contributed to a major drop in the US stock market on May 6 2010 which came to be known as the "Flash Crash", US prosecutors have said.
Sarao is accused of placing multiple orders before cancelling them without executing them, causing prices to fall.
US prosecutors claim that when the prices fell, Sarao then sold futures contracts, only to buy them back at a lower price. Conversely, when the market moved back up as the activity ceased, Sarao allegedly bought contracts, only to sell them at a higher price, the US Justice Department said.
The flash crash saw the Dow Jones Industrial Average plunge 600 points in five minutes, causing tens of billions of pounds to be wiped off the value of US shares.
Sarao - who has two brothers who work as an optician and an IT consultant - will next appear at Westminster Magistrates' Court for a review hearing on May 26, before a provisional two-day hearing on August 18 and 19.
A large pack of journalists, photographers and television camera crews from UK and US media organisations gathered near Sarao's home in Clairvale Road, Hounslow, today.
Two police officers entered the semi-detached house, where all of the curtains were closed and a green Vauxhall Corsa was parked outside.
A neighbour, HS Johal, 55, said he knew Sarao's parents but he had not seen the suspected fraudster for several years.
"He was such a nice kid but after that I haven't seen him much," he said. "I haven't seen him for a long time.
"For me they are such a nice family. They are not showing off with Mercedes or something like that.
"Navinder didn't have a car. I thought he worked somewhere else. I haven't seen him for years."
Mr Johal said Sarao's brother lives in a house on the opposite side of the street.
Anil Puri, 41, who lives near Clairvale Road, said he used to play with Sarao and his two brothers in the street when they were children.
"He was bright," he said. "He was good with everyone, like a normal kid.
"He wasn't shy. He was chirpy. We all used to play together out here quite a few years ago.
"We haven't seen them for a while." He added: "We still see the family around. His dad is always walking down here. His mum walks around as well. They were quite Cockney in their accents. They were born and bred here."
Nick Leeson, a rogue trader who brought down Barings Bank, Britain's oldest investment bank, said Sarao might be being used as a scapegoat by the US authorities.
He told LBC Radio: "I think he is surrounded by more uncertainty than he has ever felt in his life, and it is very difficult to work out the way forward.
"Events are now controlling you, and he'll be very, very scared.
"The story doesn't entirely ring true for me at the moment. It looks maybe that some of the trades that he initiated were trigger points and they have set in motion a series of events that have led the market to fall so swiftly.
"We are talking about a young trader operating out of his mum and dad's house in Hounslow and he is effectively being charged with forcing around the biggest stock market in the world, going up against some of the biggest investment banks that exist.
"It just doesn't ring true.
"I hate to jump to conclusions, but is he a scapegoat?"
He added: "It's just very difficult to see how somebody so small has done something so big."
Mr Leeson said he believed Sarao's trades were a "trigger" that "set in train" other trades which collectively caused the flash crash.
He said: "For me it looks as if it's a timing thing and some of his trades may have triggered something far, far bigger in the market and he is being put in a very difficult position because of that."
And he said he believed the trader will be jailed if he is extradited to the US.
He said: "Typically when you see a US investigation into any form of market manipulation, insider trading, it's because they have all of their ducks in a row.
"They are very, very convinced about what they have and how that would look in a court of law, and I would think they are 100% sure they will get a conviction if Sarao is extradited to the US."
The Ministry of Justice and Crown Prosecution Service were unable to say tonight whether or not Sarao had paid the £5 million bail.
The trader's solicitors did not confirm whether or not he had paid the money.