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LONDON-BASED FORMER TRADER PLEADS GUILTY IN US FOLLOWING HIS EXTRADITION FROM UK

Posted by: Gherson Extradition

LONDON-BASED FORMER TRADER PLEADS GUILTY IN US FOLLOWING HIS EXTRADITION FROM UK

A London-based former trader, who faced 380 years in jail after being extradited to the US, has pleaded guilty to fraud charges as part of a supposed plea bargain agreement between him and the US authorities.

Navinder Singh Sarao, operating remotely as a trader on the Chicago Mercantile Exchange from his bedroom at his parents' home in West London, played a part in triggering a 'flash crash' on the US stock market S&P 500 which lost more than 5% of its value in 20 minutes on 6th May 2010 before rebounding. The event caused share prices of various trading organisations to fluctuate significantly. With traders being worried about the debt crisis in Greece, the markets were highly vulnerable to manipulations at the time. Mr Sarao used bespoke sophisticated software to automatically place thousands of future contracts for a particular derivative trading on the S&P 500 stock market, which he intended cancelling later. He is believed to have made some $800,000 on that particular day. He was arrested in April 2015 to face extradition to the US, so he could be put on trial in relation to a total of 22 charges, including wire fraud and market manipulations.

For their extradition request to be successful, the US authorities had to prove that the alleged conduct of Mr Sarao met the 'dual criminality' test, meaning that his actions had to amount to criminal activity both in the UK and the US. His lawyers argued that this wasn't the case, and that the acts he was accused of did not constitute a crime in the UK. Among other things, he was charged with 'spoofing' - a technique which involves placing fake orders for futures contracts with no intention of subsequently fulfilling them, causing prices of key securities to go in the direction he wanted. The US authorities allege that Mr Sarao continued resorting to such an abusive practice until around 2014. Although there is not such a clear definition for the offence of 'spoofing' within the British isles as there is in the US, District Judge Purdy, in ordering the extradition of Mr Sarao, ruled earlier this year that the conduct alleged by the US authorities constituted a criminal act in the UK, and that the similar charges of fraud and market manipulation, upon successful prosecution, would carry a term of imprisonment of at least 12 months in the UK. Mr Sarao's last option to challenge the decision was exhausted last month in the High Court, when the judges refused his application for permission to appeal, ruling that an appeal against his extradition had no real prospect of success and that the extradition should go ahead, thus affirming the original decision.

It is understood that Mr Sarao has now pleaded guilty in a Chicago court - a jurisdiction where the stock exchange he used to trade on remotely is based - to fraud charges which carry a maximum sentence of 30 years. He has been told by the US court that he will be released on bail and allowed to return to the UK pending sentencing in the US, subject to a $750,000 bond being secured by way of placing liens on the real estate belonging to his family members in the UK. It is also understood, as part of the supposed plea bargain, he agreed to surrender nearly $13 million in proceeds that, according to the US authorities, he allegedly made from the supposed criminal activity. Meanwhile, he is also facing a financial sanction from a US regulator in the amount of $38 million.

Gherson have experience in successfully resisting extradition to the United States. If you require advice please do not hesitate to contact a member of our team.

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