British ‘flash crash trader’ sentenced to home incarceration for one year

Navinder Singh Sarao, 41, will spend the sentence in his parent's house in Hounslow, London

Navinder Singh Sarao's parents' home in Hounslow, west London. AFP

A British trader who was accused of helping to cause the 2010 Flash Crash, which temporarily cut $1 trillion in stock market value, was sentenced in the US on Tuesday to one year of home incarceration in his parent's house.

Navinder Singh Sarao, 41, was arrested in 2015 for contributing to the volatility of May 6, 2010 when markets dropped 5 per cent in five minutes.

Sarao did this over five years using an illegal market technique called spoofing, using a software program he designed himself called the NAVTRader.

From his parents’ home in west London, he would blast and then quickly cancel mammoth sell orders.

On Tuesday, a Chicago court sentenced him to a year of home incarceration, returning him to his parent's house in Hounslow, where the crimes were committed.

But the decision was criticised by lawyers who said it would be unenforceable outside of he US.

Sarao will have served no time in jail beyond the four months he spent in UK prison in 2015 before he was released on bail.

In a case that has made headlines across the world, the prosecution and the defence recommended that Sarao, who was extradited to the US, serve no additional jail time.

“The government agrees with the probation officer and the defendant that a sentence of time served would be appropriate,” prosecutor Michael O’Neill wrote in a recommendation published this month.

After he pleaded guilty to wire fraud and spoofing in 2016, the government had originally recommended a prison sentence of between 78 and 97 months.

Nicknamed the “flash crash trader”, Sarao was diagnosed with autism after his arrest.

His lawyers had argued he was too childlike to spend any time in prison and had treated markets like a computer game in his bedroom.

Despite making £45 million trading, Sarao did not live a lavish lifestyle. His biggest purchase was a second-hand Volkswagen car, which he bought for £5,000.

An autism specialist quoted in documents submitted to the court by his defence lawyer said Sarao’s behaviour was “wholly consistent” with autism.

“Navinder’s lack of any concern for or use of the money he earned, and his trading obsessively like a child trying to beat a high score on a computer game, are wholly consistent with, and a consequence of, his autism,” Simon Baron-Cohen wrote.

“He was ‘playing the game’ according to the rules he saw other traders were using, which included ‘spoofing.’”

Sarao later lost most of the money he had earned to fraudsters and the US government has been unable to retrieve it.

The Justice Department said Sarao did not appear to be interested in spending the money he had accrued and had helped them to find and prosecute other illegal traders.

“The defendant’s keen insights and explanations regarding general and specific patterns of deceptive and manipulative trading have illuminated the government’s understanding of similar spoofing,” Mr O’Neill wrote.

“As a result, he has substantially assisted and informed the government’s nationwide efforts to detect, investigate and prosecute these crimes.”

In 2019 he testified against his former programmer Jitesh Thakkar, who was later acquitted when the case collapsed.

During this co-operation with US authorities, Sarao was allowed to return to his parents’ house in the UK where his lawyer Roger Burlingame said he sleeps in a child-like bedroom with stuffed animals and used vouchers for McDonalds meals.