LONDON (Reuters) - A London-based trader, accused by the U.S. of contributing to the 2010 Wall Street “flash crash”, should not be extradited because the offences he is accused of are not crimes in Britain, his lawyers said on Friday.
Navinder Sarao also had only a “gossamer thin” link to the 2010 market plunge, his lawyer Joel Smith told London’s Westminster Magistrates Court.
“Anybody who knows anything seems to be saying (it‘s) nothing to do with Mr Sarao,” Smith said.
Sarao, 37, who traded on the Chicago Mercantile Exchange from his parents’ home near London’s Heathrow Airport, is wanted in the United States to face trial on 22 criminal counts including wire fraud, commodities fraud and attempted price manipulation. He denies any wrongdoing.
U.S. authorities say he is guilty of “spoofing” by placing large orders which manipulated the markets and then cancelled or modified them, allowing him to buy or sell at a profit.
His actions, they say, helped played a role in events which caused the flash crash on May 6, 2010 when the Dow Jones Industrial Average briefly fell more than 1,000 points, temporarily wiping out nearly $1 trillion in market value.
His spoofing netted him a profit of $40 million, they argue.
Mark Summers, the lawyer representing the United States, said the CME had been “bubbling hot” on the day of the crash and had then boiled over.
“Mr Sarao was one of the significant heat sources,” he said.
However, Sarao’s extradition does not hinge on his guilt or otherwise but on technical legal issues.
“The key question for this court is whether the conduct of Mr Sarao amounts to a crime in the UK,” James Lewis, another of his lawyers, said. “Quite simply it does not. There’s no English crime of spoofing.”
The crux of the defence case is that Sarao placed genuine orders which exposed him to risk if they were executed.
The court heard on Thursday from Professor Lawrence Harris, a former U.S. Securities and Exchange Commission chief economist, who said traders placed and cancelled millions of orders every day.
Lewis told the court 99 percent of all orders were cancelled and that thousands of traders in England would be guilty of criminal activity if that behaviour alone were considered illegal.
Judge Quentin Purdy said he would give his extradition ruling on March 23.