A British man, accused of a major role in the May 2010 “Flash Crash” of US stock market indices, can be extradited to the United States to face criminal charges, a Westminster magistrates court on ruled Wednesday.
Navinder Singh Sarao is accused of “spoofing” the market by placing false purchase orders which he didn’t intend to carry through with, leading to a massive plunge in the US stock values within minutes, reported The New York Times. US authorities estimate that on May 6, 2010, the day of the “Flash Crash,” the Dow Jones Industrials briefly fell nearly 1,000 points, temporarily wiping out nearly $1 trillion worth of shares. The authorities allege that he made up to $900,000 profit that day, and about $40 million – through similar tactics – in four years.
Mr. Sarao denies any wrongdoing, and his defense team is expected to appeal the court’s decision. His lawyers argued that Sarao isn’t entirely responsible for the crash, saying that other participants contributed.
In their ruling, the judges wrote that the crash might not have resulted from the actions of Mr. Sarao alone, but “he was acting on the day,” Bloomberg reported. Adding that “in any event, [the day of the crash] is also a single trading day in over 400 relied upon by prosecutors.”
They also argued that he shouldn’t be extradited because “spoofing” doesn’t constitute a crime in Britain.
To which the prosecution countered by saying that while Sarao was in the UK, most of the damage occurred in the US.
His extradition won’t take effect immediately, however. Britain’s Secretary of State has two months to review the court’s decision before the order is made official.
If the order is approved, Sarao would face 22 criminal charges, including wire fraud and commodities manipulation, which could carry a maximum of 380 years in jail. The US generally issues tougher punishments to white collar criminals compared to the UK, according to CNBC.
The ruling comes a few months after the United States Sentencing Commission (USSC) made controversial changes to the guidelines that federal judges use when sentencing people who commit white-collar crimes, despite criticism from several departments and organizations including the US Department of Justice, criminal defense organizations, and a wide-range of advocacy groups.
The previous guidelines, which relied on calculating the amount that a criminal gains from a crime or the losses inflicted on the victim to determine the suitable sentence for the criminal, were highly disputed. Prosecutors and judges argued that some of the sentences were so severe that they aren’t taken seriously.
“The arithmetic behind the sentencing calculations is all hocus-pocus – it’s nonsensical, and I mean that sincerely,” Judge Jed S. Rakoff of the US District Court in Manhattan told Newsweek last June. “It gives the illusion of something meaningful with no real value underneath.”
The new guidelines, which have already faced harsh criticism, are meant to make sentencing fairer, according to the USSC. Under the new guidelines, the calculation for the sentencing is based on the criminal's role and his/her intention. But the Department of Justice argues that the changes aren’t fixing the problem and may create a loophole making it harder to prove what the criminal intended, the Huffington Post reported.