A British trader accused of triggering a "flash crash" on
Wall Street five years ago is fighting extradition to the United States.
The 36-year-old man, who was arrested at his parent's home in West
London, faced court briefly and is about to be released on US$7.5 million bail
after a night behind bars.
Navinda Singh Sarao was arrested in the living room of his parent's
home dressed in a tracksuit rather than the pinstripe fashion that many would
associate with high powered market traders.
It is alleged that Sarao was responsible for a sudden crash in share
valuations on May 6 2010 which saw the Dow Jones Industrial Average briefly
plunge more than 1,000 points.
The crash temporarily wiped nearly a trillion dollars off sharemarket
valuations.
The high speed trader made his first court appearance after the US
Justice Department charged him with wire fraud, commodities fraud and market
manipulation over several years.
Sarao is accused to using a complex automated program to
"spoof" markets which saw him reap a profit of US$40 million.
The court heard that the "spoof" program generated large sell
orders that pushed down prices which allowed Saroa to cancel trades to buy in
at lower prices.
It is alleged that Sarao's activity on 6 May earned him a profit of
US$750,000.
However, experts are divided on whether US regulators have the
necessary proof to secure a conviction against Sarao.
Hain Bodek, a former trader with UBS and Goldman Sachs, became a
"whistleblower" on irregularites caused by high speed trading.
But he told the BBC there is no firm agreement on what actually caused
the "flashcrash" in 2010 and that prosecutors will need to come up
with hard evidence.
"It's a very bold approach for the regulators. It would require
that they provide some form of analylitics or some real concrete scientific
justification," Mr Bodek said.
"And even with this latest action we still don't have a general
agreement on the cause or the trigger of the flash crash."
Navinda Sarao will remain on bail before he faces an extradition
hearing in August but has indicated he plans to fight the action to place him
on trial in the United States.
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