A trader based in London, Navinder Singh Sarao was detained on April 21, 2015, on suspicion that his company, Nav Sarao Futures Limited PLC, had something to do with the May 2010 “Flash Crash,” which saw the Dow Jones Industrial Average drop 600 points in only five minutes.
Authorities in the UK accused him of engaging in illicit trading practices, including spoofing, in wire fraud, manipulation, and commodities fraud. In addition, he was accused by the U.S. Commodities Futures Trading Commission of illegally spoofing, manipulating, and attempting to manipulate the E-mini S&P 500 futures contracts.
The manipulation occurred on the CME Group’s Globex electronic trading system, and the CFTC said its investigation showed he had made a sizable profit from it. According to the CFTC, between 2010 and 2014, Sarao and his business made an estimated $40 million in earnings thanks to his plan.
According to the CFTC, U.S. officials have been granted court authorization to freeze Sarao’s accounts, totaling $7 million in assets thus far. The claims made against him were not the same as those made in a 2010 study by the Securities and Exchange Commission and the CFTC, which determined that a mutual fund company’s large computer-driven sell programme was what caused the Flash Crash. He was behind bars in London for four months.
Nearly 400 days of trading conducted by Sarao between April 2010 and April 2014 were examined as part of the CFTC‘s inquiry. Sarao is said to have applied the dynamic layering technique on sixty-three percent of those days throughout that period.
According to the CFTC, he allegedly employed a spoofing tactic, placing orders for 188 and 289 lots on the sell side of the market, then cancelling them before they could be filled. The agency also discovered that Sarao employed a different trading strategy in which he executed an order on one side of the market, “flashed” a sizable 2,000-lot order on the other, and then retracted the 2,000-lot order prior to it being filled.