A high frequency trader in the UK has been arrested on charges he manipulated financial markets and helped precipitate the 2010 "Flash Crash," which saw US markets inexplicably plummet hundreds of points within minutes.
Navinder Singh Sarao is alleged to have made $40 million trading off the plunge he helped initiate. The May 2010 "Flash Crash" saw the US Dow Jones Industrial Index plunge more than 1,000 points before recovering toward the end of the trading day.
The US Justice Department has charged the 37-year-old, of Hounslow, UK, with wire fraud, commodities fraud and manipulation.
Sarao also faces civil charges from the Commodity Futures Trading Commission (CFTC), which called him "a very significant player in the market."
"His conduct was at least significantly responsible for the order imbalance that in turn was one of the conditions that led to the flash crash," CTFC head of enforcement head Aitan Goelman said on a conference call with reporters.
Sarao "allegedly traded in a manner designed to profit from this temporary artificial volatility," the CFTC said.
The case against Sarao is the first time US regulators have alleged that market manipulation played a role in the crash, which is still being investigated.
Sarao will appear in a London court on Wednesday. The US Justice Department will request he be extradited to the United States to face the charges.
A defense attorney has not yet commented on the allegations against Sarao.
High frequency traders use automated computer systems to purchase and sell securities in fractions of a second, making small profits that rapidly accumulate on account of the large volume of trades made.
The May 6, 2010 "Flash Crash" damaged investor confidence and led to a series of federal regulations designed to prevent a repeat.
bw/cmk (AP, Reuters, AFP)