Navinder Sarao, the London-based futures trader who in April 2015 was criminally charged with contributing to the May 2010 “Flash Crash,” is now less than 28 days away from likely being extradited from his home abroad to the United States to stand trial. This is the result of a decision last Friday by two justices of the UK’s High Court denying Mr. Sarao permission to challenge a prior extradition order. Previously, another UK court found that the offenses for which Mr. Sarao was indicted in the United States – spoofing and engaging in manipulative conduct – would be prosecutable in the United Kingdom, albeit under different laws and thus his involuntary transfer to the United States was warranted. (Click here for background on Mr. Sarao’s prior UK court hearing in the article, “Alleged Spoofer, Blamed for Partly Causing Flash Crash, Loses UK Extradition Hearing” in the March 27, 2016 edition of Bridging the Week.) In April 2o15, Mr. Sarao was also subject to civil charges brought by the Commodity Futures Trading Commission. The CFTC charged Mr. Sarao and his trading company, Nav Sarao Futures Limited PLC, with engaging in spoofing involving E-mini S&P futures contracts traded on the Chicago Mercantile Exchange for the purpose of disrupting the market in order to facilitate related trading that netted him profits in excess of US $40 million. The alleged wrongful trading occurred between April 2010 and April 2015. In addition, the two defendants were charged by the CFTC with manipulation, attempted manipulation and employing manipulative or deceptive devices or contrivances. (Click here for details regarding the criminal and CFTC civil allegations against Mr. Sarao in the article, “London-Based Futures Trader Arrested, Sued by CFTC and Criminally Charged With Contributing to the May 2010 Flash Crash Through Spoofing” in the April 22, 2015 edition of Between Bridges.) The “Flash Crash” refers to events on May 6, 2010, when major US-equities indices in the futures and securities markets suddenly declined 5-6 percent in the afternoon in a few minutes before recovering within a similarly short time period.
Legal Weeds: Earlier this year Michael Coscia was sentenced to three years’ imprisonment for illicit futures trading he engaged in during three months in 2011. Like Mr. Sarao currently, Mr. Coscia had been criminally charged for violating the law prohibiting spoofing that was enacted after the 2007-2008 financial crisis. (Click here to access Commodity Exchange Act Section 4c(a)(5)(C), 7 US Code § 6c(a)(5)(C).) Previously, Mr. Coscia had settled civil actions related to the same conduct with the CFTC, the Financial Conduct Authority and the CME Group by payments of aggregate fines of approximately US $3.1 million; disgorgement of profits; and a one-year trading suspension. (Click here for details in the article, “CFTC, UK FCA and CME File Charges and Settle with Proprietary Trading Company and Principal for Spoofing” in the July 22, 2013 edition of Between Bridges.) Mr. Coscia was convicted of six counts of commodities fraud and six counts of spoofing for his prohibited trading activities in November 2015. (Click here for details of Mr. Coscia's conviction in the article, “Jury Convicts Michael Coscia of Commodities Fraud and Spoofing” in the November 8, 2015 edition of Bridging the Week.)