Flash Cash Crashes out of the High Court
"Flash crash" to be extradited to the United States
Navinder Sarao, the UK trader nicknamed “flash crash” has been told by the UK courts that he will be sent to the United States within twenty-eight days, Sarao did not attend the High Court in London to receive the Judgement.
Sarao is accused of “spoofing” the stock market over a period of five years. “Spoofing” is where traders enter and promptly cancel a large purchase or sale of stock. The effect of “spoofing” is to attempt to manipulate the market by artificially creating a certain impression of the stock. Sarao’s alleged “Spoofing” led to the stock market crash in 2010, he is said to have contributed to a fall of one thousand points on the Dow Jones Index on the 6th May 2010.
The alegation is that Sarao used a modified computer which acted at extremely high speeds this allowed him to place large sales of shares on the stock exchange, the price of the stock then dropped due to the rest of the market also selling shares from that business. He supposedly then bought large quantities whilst the prices were artifically low, then cancelled the original sale and resold the stock when the price increased to its natural market value often only minutes later. Whilst each stock may not make a great deal of profit the repetition of the action over the course of the day would added up considerably.
Sarao has continued to deny the twenty-two charges against him. The charges of fraud and market manipulation could see Sarao sentenced to three hundred and eighty years in prison. According to the United States authorities, Sarao made £900,000 through spoofing, from his parents’ house in Hounslow, on the day of the 2010 flash crash. The flash crash was where $1 trillion was wiped temporarily from the value of the United States stock market.
It has been suggested that over the five years Sarao was spoofing the market he profited £28million. Sarao operated on the Chicago Mercantile Exchange but the United States authorities said the effects of his spoofing caused larger market instability leading to the 2010 stock market crash. Sarao’s top extradition barrister has argued he was unable to have contributed materially to the market crash, instead he suggested the crash was caused by a United States hedge fund who had placed a giant sell. This conclusion had previously been suggested by the United States regulator.
Sarao was arrested on April of 2015, the start of his eighteen-month battle against extradition. Sarao’s top extradition barrister has argued he should be able to appeal because the charges by the United States were not outlined properly. The judges however rejected the appeal, their reasoning is not yet known but will be released in due course.
At Sarao’s previous extradition hearing in March of 2016 an extradition judge held that one single action could not be the cause of the stock market crash. He went on to state that the blame of the crash cannot be laid on the actions of one.
Extradition to the United States from England and Wales is a process that begins with the United States prosecutor obtaining a warrant for the arrest of the individual. The Crown prosecution service then takes the case to court acting in place of the United States.
After the suspect has been arrested the English courts have to decide whether the United States have met the extradition requirements. This test examines the lawfulness of the extradition request. The United states do not need to provide all of the evidence from the case, they instead must show why they have a reasonable level of suspicion to extradite.
The test to extradite a citizen from the United States to the United Kingdom is different. The United Kingdom sends their extradition request to the United States Department through the British Embassy. A lawyer in the state department then reviews the request to check if it conforms to the 2003 treaty. They then go on to examine if there is probable cause which would justify the request.
The request can then be challenged by extradition lawyers if it arguably lawful. If deemed to be lawful by the Court then the Secretary of State decides whether there any human rights considerations that block extradition.
In October 2016 an independent review found that since the 2003 seven extradition requests made by the United States had been rejected but zero requests from the United Kingdom had been rejected.
Since the 2003 treaty it has become easier for the United States to have someone from the United Kingdom extradited to the United States. Pre-2003 the United States needed to provide a “prima facia” case to the British courts.
The treaty has had mixed reviews. On the one hand it has been argued that removing the prima facia test means there is one broad test which a suspect faces irrelevant of country. Campaigners on the other hand argued that it is unjust to extradite someone without proper tests as to the sufficiency of the evidence.
In June of 2011 Parliament’s Joint Committee on Human Rights released a report regarding extradition which suggested the burden of proof should be increased. Top extradition lawyers contributed to this report including George Hepburne Scott.
Under extradition law the suspect can be extradited to the United States but only if the crime they are accused of is also a crime in the United Kingdom. The court found sufficient evidence that the crime Sarao is accused of is a crime in English law.
Sarao’s top extradition barristers have advised against public statements so what we know about Sarao currently is limited. We do know that he will now face extradition to the United States within a month, Sarao worked from his room in his parents’ house, was a bright child at school and like Lauri Love has a severe version of Asperger’s syndrome. We also know that Sarao was imprisoned from April 2016 to August 2016 due to an outburst at his earlier trial, he also was unable to make bail conditions due to the United States freezing his assets.
Time will tell if the top team of extraditon lawyers representing Sarao will now make an appeal to the UK Supreme Court.