Whatever Happened to the ‘Flash Crash’ Trader?

British stock trader Navinder Sarao was accused of helping cause a $1 trillion stock market crash in 2010. But the rest of his story is now being told in a new book titled Flash Crash: A Trading Savant, a Global Manhunt, and the Most Mysterious Market Crash in History. “I think that he was a gamer and, for him, markets were honestly the ultimate form of game,” author Liam Vaughan tells the New York Post:
Sarao was more concerned with the rise of high-frequency trading, a method of buying and selling that used powerful computers and algorithms to execute trades in fractions of seconds. The speed allowed (mostly) large, monied firms to beat others to a trade, thereby securing a better price. Sarao bristled at the unfairness. He began engaging in what is known as “spoofing.” He hired software developers to write programs that would allow him to place millions of dollars worth of orders, then — after other traders had reacted to his potential trade — abruptly cancel his order. The deception allowed Sarao to nudge the market higher or lower and reap the benefits. His trading habits eventually drew scrutiny from the Chicago Mercantile Exchange, earning him cautionary letters. Sarao, however, phoned the authorities and told them to “kiss my ass.” Then on May 6, 2010, Sarao logged on from his bedroom and began furiously trading, attempting to capitalize on the volatility still roiling the markets after the 2008 crisis. In the final two hours before he logged off at 7:40 p.m. London time, the trader had bought and sold 62,077 e-mini contracts — with a combined value of $3.4 billion. A minute later, markets tumbled with a “velocity and intensity it never had before,” Vaughan writes… Sarao was later arrested and extradited to the United States, only the second person ever charged with spoofing. It’s unclear how much his actions contributed to America’s so-called “flash crash.” The US government contends that he was partially responsible, while some financial experts disagree, seeing him as a Robin Hood whose actions only hurt wealthy companies. But whatever happened to Sarao? The Post writes that he cooperated with authorities, and the answer ultimately came quietly in January, reports CNBC:
Despite facing as much as eight years in prison, Federal Judge Virginia Kendall sentenced Sarao — who suffers from severe Asperger’s — to just one year of supervised release. Court documents submitted by Sarao’s legal team described him as a “singularly sunny, childlike, guileless, trusting person,” who lived off social security payments and played hour after hour of video games in his childhood bedroom. Sarao, who spent four months in the U.K.’s Wandsworth Prison before his extradition to the United States, has forfeited about $7.6 million in gains made from trading. U.S. authorities claimed Sarao made more than $70 million between 2009 and 2014 from his bedroom — much of it legal. However, it has been reported that he has lost almost all of his money after investing in fraudulent scams. “I think justice was done,” the new book’s author tells the Post, “because the message was out there that someone shouldn’t be thinking about doing what Nav was doing.”