Trader charged in ‘ flash crash’ case will fight extradition to U. S.

LONDON — A 36- year- old futures trader who operated from his London- area home indicated Wednesday that he would oppose extradition to the United States on criminal fraud charges, including claims that he had helped set off a crash in the U. S. stock market, known as the flash crash, in 2010.

Appearing in court in London, the trader, Navinder Singh Sarao, a British national, sat behind a glass wall looking dazed by the proceedings around him.

His defense lawyer, Joel Smith, said that the arrest had come as a “bolt out of the blue.”

Aaron Watkins, representing the U. S. government, requested that bail not be set for Sarao considering the gravity of the charges and the potential prison time he faces. The Department of Justice and the Commodity Futures Trading Commission have filed criminal and civil charges against Sarao, accusing him of wire fraud, commodities fraud, commodities manipulation and spoofing, a form of market manipulation. Prosecutors contend that he made $ 40 million in illegal profits over four years.

Asked whether he would consent to being extradited, Sarao shook his head, indicating that he would not.

Smith argued that Sarao, who was born and raised in Britain and attended Brunel University in London, has strong community ties that would deter him from fleeing the country. He lives with his parents, one brother lives down the street and another one lives nearby. His father is retired, while one brother is an information technology consultant and the other an optician.

Various conditions were put on Sarao’s bail, including a prohibition on Internet use. Sarao will face a curfew from 11 p. m. to 4 a. m. and will have to carry a cell phone with him that does not have access to the Internet. He will be required to check in with the Hounslow Police Department between 12 and 4 p. m. every Monday, Wednesday and Saturday. Smith said the Internet restriction might pose a challenge, questioning whether even watching television might violate it.

The next court date in May 26 to hear challenges to the extradition request.

A month before the flash crash, Sarao set up a corporate entity in the Caribbean island of Nevis, the criminal complaint said, calling his firm Nav Sarao Milking Markets.

During the crash in May 2010, the Dow fell nearly 600 points in a matter of minutes, rattling individual investors and institutional investors alike. Regulators have struggled to piece together what happened, offering up various explanations, many of which have been contested. Although the major indexes recovered most of the losses, the event shook investors’ confidence in the markets, and the exchanges and regulators that police them.

In the criminal complaint, Sarao is accused of entering and withdrawing thousands of orders worth tens of millions of dollars on hundreds of trading days to push down the price of futures contracts tied to the value of the Standard & Poor’s 500- stock index, a practice indicated to be spoofing. Once the price fell, Sarao would buy the contract and reap the profits, according to the criminal complaint.

Prosecutors contend that on the day of the flash crash, May 6, Sarao placed large orders repeatedly over several hours, leaving the market vulnerable to big moves when another big trade came in from an investor in the United States.