One of the notorious criminals considered as a “high-frequency trader” in London was taken by law enforcers over his alleged role in the “flash cash, which happened last May 2010. The said incident is supposed to have briefly wiped out nearly $1 trillion in market value of different assets.
The Justice Department in the United States released a statement on Tuesday that it had criminally charged Navinder, Sigh Sarao who is 36 years old and hails from the United Kingdom, with fraud and manipulation.
Police say that Sarao allegedly programed a software that has the ability to generate large sell orders, which significantly reduce prices. He then canceled such transactions and purchased the contracts at the lower prices to benefit from the situation while the market is still recovering.
Sarao allegedly used an automated program to generate large sell orders that pushed down prices. He then canceled those trades and bought the contracts at the lower prices to benefit when the market recovered, authorities said.
Aitan Goelman, head of enforcement at the Commodity Futures Trading Commission (CFTC) said that, “His conduct was at least significantly responsible for the order imbalance that in turn was one of the conditions that led to the flash crash,” Moreover also filed parallel civil charges against Sarao on Tuesday on behalf of CFTC.
Such case is the first of its kind within the jurisdiction of the US. Regulators have stated that manipulation served as a major factor in the flash cash, in which the Dow Jones industrial Average fell more than 1000 points prior to reaching a state where it is able to recover.
Sarao’s suspicious trades during 2009 already caught the attention of Chicago Mercantile Exchange’s self-regulatory staffers, according to prosecutors. The man is said to have successfully collected a sum of $40 million from 2010 and 2014,
The apprehension of Sarao by law enforcers supposedly rekindled the scrutiny of trading that is not only high frequency and automated trading. These are widespread practices that have been controversial eer since the flash crash and more importantly, after Michael Lewes’ 2014 bestseller “Flash Boys” stated equity market we fixed.
Shayne Stevenson, a lawyer at Hagens Berman Sobol Shapiro LLP, who represented the whistleblower, said that the whistleblower that had provided the CFTC with the necessary information regarding the dubious trades played an important role in the awareness of the public regarding the illegal practice.