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Press Release

Futures Trader Pleads Guilty to Illegally Manipulating the Futures Market in Connection With 2010 “Flash Crash”

For Immediate Release
Office of Public Affairs

A British futures trader pleaded guilty today to U.S. fraud and spoofing charges in connection with an over five-year scheme to defraud, which included his role in the May 6, 2010, “Flash Crash,” when the Dow Jones Industrial Average plunged 600 points in five minutes, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Special Agent in Charge Michael J. Anderson of the FBI’s Chicago Field Office and Director Aitan Goelman of the U.S. Commodity Futures Trading Commission (CFTC) Division of Enforcement.

Navinder Singh Sarao, 37, of Hounslow, United Kingdom,  pleaded guilty to one count of wire fraud and one count of spoofing before U.S. District Judge Virginia Kendall of the Northern District of Illinois.  Saro was extradited to the United States on Nov. 7 and made his first court appearance today.  

“Navinder Sarao abused sophisticated technology to make a quick profit, and jeopardized the integrity of U.S. financial markets,” said Assistant Attorney General Caldwell.  “By flooding the marketplace with bogus orders, his scheme victimized countless individuals.  Our success in bringing Sarao to justice in the United States shows that the Criminal Division will root out complex financial fraud and manipulation of the financial markets no matter where the perpetrators are located.”

“This case shows just how seriously we take threats to the integrity of our markets, from wherever they emanate,” said Director Goelman.  “The CFTC appreciates Department of Justice's doggedness in ensuring that Sarao faces justice for the harm he caused to the U.S. futures market, despite his being situated an ocean away from American shores, as well as for the assistance of our other law enforcement partners, the FBI and Scotland Yard.” 
As part of his guilty plea, Sarao admitted that he used an automated trading program, along with other techniques, to manipulate the market for E-mini Standard & Poor’s (S&P) 500 futures contracts  (E-minis), stock market index futures contracts based on the S&P 500 index, through the Chicago Mercantile Exchange (CME).  The E-mini S&P 500 is considered among the most widely traded financial products in the world.  Sarao admitted that he placed thousands of orders that he did not intend to trade, or “spoof orders,”  to create the appearance of substantial false supply and demand and to induce other market participants to trade E-minis at prices and quantities they normally would not have traded.   In thousands of instances, Sarao admitted, he was able to induce other market participants into buying or selling E-minis by placing the spoof orders, which had the additional purpose and effect of artificially depressing or artificially inflating the price of E-minis.  On the day of the “Flash Crash,” Sarao entered at least 85 spoof orders to sell E-minis, which, at various times throughout that day, represented well over 20 percent of all E-mini sell orders visible to the market, he admitted.  

According to the plea agreement, in instances when a market reaction occurred, Sarao frequently executed real, genuine orders to buy (typically at artificially low prices) or sell (typically at artificially high prices) E-minis.  He admitted that he frequently was able to generate significant trading profits from buying and selling his genuine orders close in time with the placement of the spoof orders.  As a result of his scheme, Sarao admitted that he was able to make at least $12.8 million in illicit gains.   
The FBI’s Chicago Division is investigating the case.  Assistant Chief Robert Zink and Trial Attorney Michael T. O’Neill of the Criminal Division’s Fraud Section are prosecuting the case with assistance from the U.S. Attorney’s Office for the Northern District of Illinois, the Criminal Division’s Office of International Affairs and the International Assistance Unit of the Metropolitan Police Service of London.  The CFTC’s Division of Enforcement provided substantial assistance in this case and referred this matter to the department.  

Updated November 9, 2016

Securities, Commodities, & Investment Fraud
Press Release Number: 16-1314