Hounslow's Navinder Singh Sarao now faces up to 30 years in prison after he admitted to manipulating the market and committing fraud.
Sarao was charged for offenses including the US wire fraud, commodities fraud and manipulation charges in connection with his role in the 'Flash Crash' when the Dow Jones Industrial Average plunged 600 points in five minutes. He is also accused of “spoofing,” - a practice in the financial trading term involving bidding with the intent to cancel the bid before execution.
Singh Sarao is billed 'Hound of Hounslow' reflecting his freaky fiction-like role in single-handedly manipulating the stockmarkets as seen in the Hollywood film Wolf of Wall Street.
Navinder Singh Sarao, 36, of Hounslow has been arrested in the UK, and the US is requesting Britain for his extradition. Singh Sarao was charged in a federal criminal complaint in the Northern District of Illinois on February 11, 2015, 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.
According to the US court's allegations, Sarao allegedly used an automated trading program to manipulate the market for E-Mini S&P 500 futures contracts (E-Minis) on the Chicago Mercantile Exchange (CME). E-Minis are stock market index futures contracts based on the Standard & Poor’s 500 Index. Sarao’s alleged manipulation earned him significant profits - £27m according to some reports.
Navinder Singh Sarao allegedly employed a “dynamic layering” scheme to affect the price of E-Minis. By allegedly placing multiple, simultaneous, large-volume sell orders at different price points—a technique known as “layering”— Singh Sarao created the appearance of substantial supply in the market. As part of the scheme, Singh Sarao allegedly modified these orders frequently so that they remained close to the market price, and typically canceled the orders without executing them. When prices fell as a result of this activity, Sarao allegedly sold futures contracts only to buy them back at a lower price. Conversely, when the market moved back upward as the market activity ceased, Sarao allegedly bought contracts only to sell them at a higher price.
The charges contained in the complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty, according to the US Department of Justice.
This case is being investigated by US authorities with assistance from the Metropolitan Police Service of London.Follow Archana Venkatraman on Google+