Navinder Singh Sarao, a patsy charged in the 2010 flash stock market crash, is being released after spending four months in a London prison. Sarao is now fighting extradition after a judge changed his terms of bail.
The trader’s release was secured as he revealed around $39 million USD worth of assets that were invested in Switzerland. The U.S. will now seize the money that Sarao was charged with making illegally. As the money becomes available, Sarao will pay the court just under $4 million from the Swiss assets.
Sarao was arrested and charged with market manipulation and fraud as he allegedly played was behind one in five sell orders on May 6, 2010, as almost $1 trillion vanished from the U.S. stock market in a few minutes. Yet the claims, as we’ve covered before, raise a series of tough questions as Sarao was one single individual using a retail brokerage account.
Sarao merely beat high frequency traders at their own game and sought to have his trades fairly executed. What ensued was financial chaos, caused by a cascading series of algorithms launched by large high frequency trading (HFT) firms. The incident exposed serious weaknesses in the financial system introduced by predatory electronic trading, where one single trader can destroy $1 trillion of wealth in a keystroke.
Yet Sarao has been in jail since authorities placed him in custody in April at his house in London and the big HFT firms like Citadel and Vertu haven’t been asked to account for their much larger role in the crash.
The original bail was set at just under $8 million based on the amount in Sarao’s trading account. There were two unsuccessful attempts at getting the security waived as the U.S. claimed he had made over $60 million in profit. However, the disclosure of the $39 million in Switzerland was enough to satisfy authorities that eventually granted the renewed bail.
According to Sarao’s lawyers, the trader was diagnosed with Asperger’s Syndrome in the past. They cite this as a key reason against his extradition.
Currently, Sarao is unable to leave the greater London area. He is also unable to access the Internet for any “fiscal” purposes.
The next scheduled hearing for his extradition is for September although his lawyers are asking for a delay.
The most recent hearing lasted 45 minutes and was free from the drama that marked the May court appearance. Sarao shouted that he was only guilty for being good at his job, which appears to be the truth.
Whether HFT giants like Citadel and Vertu will let that truth out remains to be seen. Its far more convenient for them to let Sarao hang than shine light on the murky world of their dirty dealings. Thus far regulators in the United States, who are notoriously close to Citadel, have refused to publicly examine the issue. UK authorities also seem unwilling to get involved beyond Mr. Sarao.
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