Federal law enforcement officials on Tuesday announced that they had arrested a United Kingdom-based futures trader for market manipulation that played a role in the 2010 “Flash Crash” that saw the Dow Jones Industrial Average plunge 600 points in five minutes.
The Commodity Futures Trading Commission said that the FBI and UK law enforcement arrested Navinder Singh Sarao Tuesday at his London residence on charges of wire fraud, commodities fraud, commodities manipulation and “spoofing,” or pretending to offer transactions to influence prices.
The commission said Sarao has been manipulating markets for stock market futures using a spoofing scheme since 2009.
Sarao and his company were “exceptionally active” on the day of the Flash Crash, May 6, 2010, according to the commission.
Federal regulators previously investigated the cause of the Flash Crash, and Congress held oversight hearings, but Tuesday’s announcement marked the first arrest related to the episode. The Flash Crash took place as the economy was still damaged from the 2008 financial crisis, and fears about the integrity of financial markets were widespread.
“Protecting the integrity and stability of the U.S. futures markets is critical to ensuring a properly functioning financial system,” the commission’s Director of Enforcement Aitan Goelman said. “Today’s actions make clear that the CFTC, working with its partners on the criminal side, will find and prosecute manipulators of U.S. futures markets wherever they may be.”
Sarao has made $40 million on trading relating to the market in which he engaged in manipulation since 2010, the commission said.
Sarao, who is 37, is under the custody of the U.K. government, and the U.S. has requested his extradition, according to the Justice Department.
