Sarao was arrested by British authorities on April 21 in London.
An Indian-origin trader on Wednesday became the second person convicted of criminally spoofing US futures markets after he pleaded guilty to federal charges that he contributed to the Wall Street’s 2010 “flash crash”.
Navinder Singh Sarao, 37, who traded on the Chicago Mercantile Exchange from his parents’ home near London’s Heathrow Airport, pleaded guilty to the count of wire fraud and one count of spoofing before US District Judge Virginia Kendall of the Northern District of Illinois.
“Navinder Sarao abused sophisticated technology to make a quick profit, and jeoparadise the integrity of US financial market,” the US Assistant Attorney General Leslie R Caldwell said. “By flooding the marketplace with bogus orders, his scheme victimized countless individuals”.
He also added that the charges against Sarao include his role in the May 6, 2010 ‘Flash Crash’ when the Dow Jones Industrial Average plunged 600 points in five minutes.
Sarao, who was arrested by British authorities on April 21 in London, was extradited to the US on November 7 at the request of the US Department of Justice. Yesterday’s was his first court appearance.
Sarao used a modified computer program to ‘spoof’ E-mini S&P 500 futures by generating large sales orders that pushed down prices and then cancelled the trades and bought the contracts at the lower prices, prosecutors alleged.
He entered at least 85 spoof orders to sell E-minis on the day of the ‘Flash Crash’ at various times throughout the day, represented well over 20 per cent of all E-mini sell orders visible to market, Sarao admitted. He told judge that he understood the terms of the plea deal.
Even though the sentencing his pending, Sarao will be released on a $750,000 bond and be allowed to return to the UK. According to the judge, Sentencing guidelines call for him to be jailed for 78 to 97 months and the maximum possible jail term for the crime is 30 years.
Last year, government convicted commodity trader Michael Coscia, who became the first person convicted under the provision after a jury found him guilty.