Hound of Hounslow ‘did 7m deals in a day’
A TRADER accused of triggering one of the biggest crashes in Wall Street history from the bedroom of his parents’ semi once made over seven million deals in a single day, a court heard yesterday.
Navinder Sarao used automated software to place massive numbers of orders and then cancel them in quick succession.
This had the effect of lowering prices, which Sarao took advantage of to make £27million in profits over five years, it is claimed.
In one day in May 2010, the trader netted nearly £1million as a result of modifying 7.5million orders.
But this was not the so- called Hound of Hounslow’s biggest pay day. In one 24-hour period in August 2011 he made £4million using the same ‘spoofing’ technique from his family’s West London home.
Sarao is fighting extradition to the US, whose authorities claim his activities contributed to the 2010 ‘Flash Crash’, when the Chicago-based Dow Jones Industrial Average plunged 998.5 points, wiping almost a trillion dollars from global share prices.
On the day of the crash, Sarao made £617,500 through illegal activity, the US Department of Justice and the Commodity Futures Trading Commission claim.
If extradited, the 37-year-old faces charges of wire fraud, commodities fraud and market manipulation between June 2009 and April 2014, and could receive up to 380 years in jail if convicted.
But yesterday his legal team called for the case to be dropped, as the extradition demand was full of ‘misleading and inaccurate submissions’.
‘Errant nonsense’
James Lewis QC told the hearing at Westminster Magistrates’ Court that Sarao had committed no crime in Britain, and extradition would breach his human rights.
For the US authorities to succeed in having Sarao extradited, they have to prove the crimes he is accused of are also an offence in the UK.
‘It’s simply not the reality of what happens in any market. It’s errant nonsense,’ Mr Lewis said. He added that Sarao, who worked for several trading firms before setting up on his own, used legitimate techniques and is being made a scapegoat for US market regulators’ failings.
The only people harmed by Sarao’s alleged activities were other traders and that the market normalised ‘ within minutes’ after the Flash Crash, Mr Lewis said.
He argued that many traders regularly cancelled their orders and it was incorrect for the US to say Sarao had no intention of fulfilling his orders.
Outlining the case against the trader, Mark Summers QC said his ‘dishonest’ trading contributed to a market imbalance which culminated in the Flash Crash.
‘The US government says there is a difference between a genuine trader on the market and the defendant, who from the outset intended for his orders never to be executed,’ he said. On one day alone – August 4, 2011– Sarao allegedly made £4million by manipulating 4,000 orders.
On May 4, 2010, he modified orders 7.4million times, Mr Summers said, accounting for 42 per cent of all modifications across the market that day.
‘The end result of which he had artificially lowered the price in the futures he was keen to purchase,’ he added.
‘He was able to buy some 8,000 of them, and in the reverse direction he was able to sell almost 8,000 orders – making £875,000 profit for himself.’
Sarao was arrested at his parents’ Hounslow home in April last year at the request of US authorities.
Yesterday, wearing a grey suit and cornflower blue tie, he sat in the dock with his head bowed throughout the hearing.
He i nsists he is i nnocent and claims he has been singled out because he was very good at his job.
The hearing continues.