Published: Thu, November 10, 2016
Economy | By Melissa Porter

British trader charged in 'flash crash' pleads guilty

British trader charged in 'flash crash' pleads guilty

The markets later recovered that day in May 2010, although prosecutors told U.S. District Judge Virginia Kendall on Wednesday that Sarao also had committed wire fraud from 2009 to 2014.

US judge Virginia Kendall said she expected Sarao would also be jailed for 78 to 97 months, based on sentencing guidelines. The maximum possible jail term for the crimes is 30 years.

High frequency traders such as Sarao use programs to buy and sell in milliseconds, scooping up quickly-accumulating profits.

Prosecutors contended his actions contributed to market instability that led to the flash crash on May 6, 2010, when the Dow Jones industrial average .DJI briefly plunged more than 1,000 points, temporarily wiping out almost $1 trillion in market value.

Sarao who traded from his parents' home near London's Heathrow Airport, initially proclaimed his innocence.

"By flooding the marketplace with bogus orders, his scheme victimized countless individuals", she said in a statement.

The case is the government's second conviction of a futures trader charged with criminal spoofing, after an anti-spoofing provision was added to the Commodity Exchange Act by the 2010 Dodd-Frank financial reform, said Renato Mariotti, a former U.S. prosecutor in Chicago. He had claimed that the charges were not illegal under United Kingdom law.

Prosecutors asked that the judge agree to release Sarao on a $750,000 bond secured in large part by his parents' home in Britain, saying his cooperation would be more effective if he was out from behind bars.

"He doesn't even drink tea or coffee", Sarao's father assured the judge.

Sarao suffers from a severe form of Asperger's syndrome, which is related to autism, according to his lawyer Roger Burlingame of the firm Kobre and Kim.

US prosecutors said Sarao manipulated one of the most important financial assets in the world - futures on the S&P 500 Index, the benchmark measure for USA stock prices.

The indictment said Sarao had repeatedly rebuffed probes by regulators, insisting that he was just a fast-fingered normal trader not relying on computer programmes for trading.

In July, Michael Coscia was sentenced to three years in prison and two years of supervised release for spoofing and commodities fraud. Assistant Chief Robert Zink and Trial Attorney Michael T. O'Neill of the Criminal Division's Fraud Section are prosecuting the case with assistance from the U.S. Attorney's Office for the Northern District of IL, the Criminal Division's Office of International Affairs and the International Assistance Unit of the Metropolitan Police Service of London.

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