British Flash Crash trader says arrest came as 'bolt from the blue' as he fights extradition

Bail for Navinder Singh Sarao - who faces maximum sentence of 380 years if found guilty of all the charges against him - set at £5.05m

Flash crash trader Navinder Singh Sarao who may have caused global stock markets to crash in May 2010
Flash crash trader Navinder Singh Sarao, who may have caused global stock markets to crash in May 2010 Credit: Photo: Telegraph Media Group

The British man accused of triggering the 2010 'flash crash' which wiped hundreds of billions of pounds from global stock markets has said he will fight his extradition to the US.

Navinder Singh Sarao, who worked as a day trader from his parents' semi-detached house in Hounslow, West London, faces a maximum sentence of 380 years in an American jail as a result of the allegations which emerged late on Tuesday night.

He is alleged to have been at the centre of the so-called 'flash crash', which knocked the major US stock market - the Dow Jones Industrial Average - by almost 1,000 points during one 45-minute period in May 2010, triggering hundreds of billions of pounds of losses.

But appearing before Westminster Magistrates Court on Wednesday, Mr Singh said he does not consent to the extradition order.

Appearing in a yellow jumper and white tracksuit bottoms, and unshaven, Mr Singh spoke only to confirm his name, his address and date of birth, and to confirm he would fight extradition. He appeared alone in court, without family or friends.

Mr Joel Smith, speaking for the defence, said Tuesday’s arrest had come as "something of a bolt from the blue” and sought time to arrange a bail application.

Mr Aaron Watkins, prosecuting on behalf of the Justice Authority of the United States of America, asked that bail be denied, saying that given the seriousness of the charges against Mr Sarao, he may resist arrest.

Mr Watkins said told the court Mr Sarao will face a "lengthy sentence" if found guilty: “It is evident from that that taking them all together, if convicted of one or more, there is a prospect of a lengthy sentence after a trial."

The charges of wire fraud, commodities fraud, commodities manipulation and “spoofing” levelled at Mr Saro carry prison sentences of between 10 and 25 years per count, or a possible $1m fine.

The court heard that a full extradition hearing will be held in August. Bail was set at £5.05m following an hour-long bail hearing.

The court also heard that Mr Sarao was born and raised in the UK, studied at Brunel University in west London, and worked in banking before he began his career as a day trader.

Mr Sarao, 36, has been charged by the US Department of Justice with one count of wire fraud, 10 counts of commodities fraud, 10 counts of commodities manipulation, and one count of “spoofing,” a practice of bidding or offering with the intent to cancel the bid or offer before execution.

Following Mr Saro's arrest on Tuesday, April 21, US prosecutors emphasised that the charges are just that - and "the defendant is presumed innocent unless and until proven guilty".

He is accused of being responsible for one in five "sell" orders on May 6, 2010, the day of the "flash crash", using automated trading software to place orders for S&P 500 futures contracts — known as E-Minis — on the Chicago Mercantile Exchange, which he then cancelled, profiting as the markets fell.

In a statement on Wednesday night, CME Group said: "Nothing is more important to CME Group than the integrity of our marketplace.

"Following the Flash Crash on May 6, 2010, together with other regulators, we did a thorough analysis of all activity in our markets during the Flash Crash, and concluded – along with regulators – that the Flash Crash was not caused by the futures market.

"If new information has come to light, we look forward to reviewing it with the [Commodity Futures Trading Commision]. We fully support the CFTC's actions to prosecute those who attempt to engage in fraud or manipulation.

"We are prohibited by law from releasing information about any individual's trading behaviour, including Mr Sarao's, so we are unable to comment further at this time."

His company - Nav Sarao Futures - was registered to his home in Hounslow, west London, where it is believed he operated from his bedroom.

Accounts for the year to October 2013 - the most recently available at Companies House - show cash on the balance sheet of £7.5m.

But prosecutors allege he generated $40m (26.7m) of trading profits over a five year period.

Filings at Companies House show as recently as last August he set up a second company, NavCorp Capital Markets, of which he was the only director. Accounts for that company have not been filed, however.