The Hounslow trader accused of helping trigger the flash crash of 2010 sent 7.4 million “trade modification” messages – sometimes seen as a sign of abusive trading – on a single day, according to prosecutors seeking to extradite him to the U.S. Navinder Singh Sarao’s trade modification messages on the CME market for E-mini futures sent on April 29, 2010, amounted to 42% of all such messages sent across the market, according to Mark Summers in opening arguments seeking to get Sarao sent to the U.S. for trial. http://www.marketwatch.com/story/na...ead-of-flash-crash-prosecutors-say-2016-02-04
It's funny that in the few documentaries I've seen talking about the flash crash they never even mention Sarao.
That's probably because the Sarao thing is relatively recent. That being said I still don't believe he is responsible for the crash and timing data also shows he was out of the market by that point anyway. They want a scapegoat.
Flash crash trader Sarao admits CFTC charges and pleads guilty in criminal action Thu, 10/11/2016 - 09:32 Tags : North America The US Commodity Futures Trading Commission (CFTC) has submitted a proposed consent order that would resolve its civil enforcement action in the US District Court for the Northern District of Illinois against Navinder Singh Sarao. The CFTC complaint charged British futures trader Sarao, along with his company Nav Sarao Futures Limited, with unlawfully manipulating, attempting to manipulate, spoofing, and use of a manipulative device — all with regard to the E-mini S&P 500 near month futures contract. In the proposed consent order, Sarao admits to the allegations in the CFTC complaint, as well as to findings of fact and conclusions of law that he successfully manipulated the E-mini S&P on at least 12 days between 27 April 2010 and 10 March 2014 (including 6 May 2010, commonly known as Flash Crash Day); attempted to manipulate the E-mini S&P tens of thousands of times between April 2010 and 17 April, 2015; placed tens of thousands of bids and offers that he intended to cancel before execution (i.e. spoof orders) between 16 July 2011 and 17 April 2015; and employed or attempted to employ a manipulative device, scheme, or artifice to defraud in connection with his spoof orders between 15 August 2011 and 17 April 2015. The proposed consent order, which was filed jointly by the CFTC and Sarao for the court’s consideration and review, also seeks imposition of more than USD38 million in monetary sanctions, permanent trading and registration bans, and permanent prohibitions against further violations of the Commodity Exchange Act and CFTC Regulations, as charged, against Sarao. Sarao pleaded guilty in the US District Court for the Northern District of Illinois to one count of spoofing and one count of wire fraud in a related criminal action. Sarao was arrested by British authorities acting at the request of the US Department of Justice and in conjunction with the Federal Bureau of Investigation on 21 April 2015 and recently extradited to the US. from Hedgeweek
Home»Money Last Modified:Fri, Feb 10 2017. 09 46 PM IST How flash crash trader Navinder Singh Sarao went from genius to dupe Navinder Singh Sarao a.k.a ‘Flash Crash Trader’ made big money trading futures from his bedroom—then lost it all Liam Vaughan Navinder Singh Sarao, a British trader charged over his role in the 2010 US flash crash leaves Westminster Magistrates’ Court following his extradition hearing in London. Photo: Bloomberg London:It took Navinder Singh Sarao a long time to accept that he might have been scammed out of $50 million. Stuck in London’s Wandsworth prison, wracked with anxiety and unable to sleep, the realization dawned on the man dubbed the “Flash Crash Trader” as slowly as spring turned to summer outside the barred window of his jail cell. The trauma of the past few weeks had been difficult to process. On 20 April 2015, the slight, doe-eyed 36-year-old had dozed off peacefully in the same suburban bedroom he’d slept in since he was a boy. The next day he was arrested and taken to a police station, where he was charged with 22 counts of fraud and market manipulation carrying a maximum sentence of 380 years. According to the US government, the British day trader had made tens of millions of dollars using an illegal practice called spoofing, including, fatefully, on the morning of 6 May 2010, when the Dow Jones Industrial Average fell almost 1,000 points in minutes before bouncing back. The extent of Sarao’s culpability for the flash crash is fiercely contested, but the incident exposed the shaky foundations on which the hyper-fast, computer-dominated financial markets now rest. Sarao’s bail was set at £5.05 million ($6.3 million). It was a hefty sum, but according to the accounts of his company, Nav Sarao Futures Ltd, he’d earned £30 million in the previous five years. Newspaper reports, in which Sarao was dubbed “The Hound of Hounslow,” speculated that he’d be back with his family in the shabby West London borough by the weekend. Instead, the nightmare got worse. “Where’s the money, Nav?” his lawyers asked again and again. Sarao couldn’t make bail, they gradually learned, because the bulk of his wealth was tied up in investments and offshore trusts, each more complicated than the last. Days in Wandsworth prison, a Victorian-era fortress where Sarao was housed with sexual predators and violent offenders, turned into weeks. After four months of dead ends, his legal team struck a deal with the authorities: If the US Justice Department and the Commodity Futures Trading Commission agreed not to oppose a reduction in bail to £50,000, the firm would act as a bounty hunter, taking on responsibility for tracking down the missing millions on the condition that its fees be paid if it did. They were going down a rabbit hole. A review of Sarao’s investments from 2005 to the present day, based on dozens of interviews and thousands of pages of documents, reveals another twist in an already remarkable story. Navinder Sarao, the trading savant accused of sabotaging the world’s financial markets from his bedroom, may himself have been the naïve victim of what his lawyers portray as a series of cons that stripped him of almost every cent he earned. A semi-detached house, the registered address of Nav Sarao Futures Ltd, a trading company operated by Navinder Singh Sarao in Hounslow, west of London. Photo: AFP Sarao declined to comment for this article. His lawyer, Roger Burlingame of Kobre & Kim in London, told a US judge in November that all of the defendant’s assets “have been stolen.” Sarao invested in ventures from which he, the law firm and the CFTC had been unable to recover the funds, Burlingame said. “Basically, he has some extraordinary abilities with respect to pattern recognition and certain sorts of mathematical abilities, but he has some fairly severe social limitations.” Sarao’s trading career started inauspiciously in 2002 at Futex, a fledgling outfit in an unglamorous office an hour from the City of London that housed wannabe traders in exchange for as much as 50% of their profit. In a roomful of recent college graduates and drifters, Sarao stood out from the pack. “Nav was always going to be the kind of person that would be legendary in some way,” Futex chairman Paolo Rossi said in an interview with Bloomberg TV after Sarao’s arrest. He had “the potential to be remembered as one of the world’s greatest traders.” It wasn’t until Sarao left Futex in 2008 and struck out on his own that he started to make serious money. Public filings show his assets popped to £14.9 million from £461,000 in the 12 months ending in June 2009, long before he enlisted a programmer to build a system that authorities say was designed to cheat the market. Former colleagues talk about Sarao’s frugality—his scruffy clothes, his reluctance to spend money on cars and watches, his abstemious eating habits. He learned early at Futex that withdrawing cash ate into his bankroll and reduced the size of trades he could place. That near-obsessive drive to hold on to as much of his wealth as possible can also be seen in the way he conducted his business affairs. Looking to minimize his tax bill, he was introduced by his accountant to John Dupont, a director at the London arm of an Isle of Man-based financial advisory firm called Montpelier Tax Consultants. Dupont, then in his mid-30s, was a high-energy salesman whose accent veered from upper class gent to Guy Ritchie cockney depending on who he was speaking with, a former employee recalls. Operating from an office on Cockspur Street in London’s West End, members of his team cold-called contractors, day traders and bankers and tried to enlist them in a range of plans to minimize their tax bills, documents seen byBloombergshow. The aim was to identify loopholes before they were closed. One former Montpelier employee said he coaxed wavering customers to sign up by promising to pay their legal bills in the event of a clampdown by Her Majesty’s Revenue and Customs. Everyone at the firm thought he was Alec Baldwin in “Glengarry Glen Ross,” the person said. Self-employed traders were particularly good prospects because they were predisposed to high levels of risk. And Sarao, an absent-minded dreamer with an unerring gift for making money who would later be diagnosed with Asperger syndrome, would prove to be the ultimate mark. In 2009, on the advice of Montpelier, Sarao entered into a complicated dividend-stripping scheme that resulted in a major reduction in his tax bill, according to a close adviser to Sarao who spoke on the condition of anonymity. Happy with the result, Sarao went a step further the following year, the person said. Among Dupont’s crew was Miles MacKinnon, a polished so-called introducer who had left school for a stint as a rugby player before heading to the City of London. For four months in 2010, MacKinnon became the only other director of Sarao’s firm. Around the same time, Sarao set up two employee benefit trusts in the Caribbean island of Nevis, according to a document filed in Sarao’s case. He plowed his earnings into those trusts, then gave himself interest-free loans to trade with and live on, the adviser said. The arrangement meant Sarao all but avoided paying corporate taxes. One vehicle was named the “NAV Sarao Milking Markets Fund.” Dupont and MacKinnon said in an e-mail that they “did not introduce or advise” on the Nevis trusts. Sarao had an uncanny ability to attract controversial characters. He sought advice from tax specialist Andrew Thornhill, who in 2015 would be charged by the British barristers’ industry group with five counts of professional misconduct. And, as theWall Street Journalreported, one of Sarao’s trusts was, for a period, affiliated with David Cosgrove, the Irish director of Belvedere Management who has been barred by Mauritius authorities from serving as a company officer because of regulatory violations. Thornhill declined to comment. Cosgrove didn’t respond to e-mails. In 2011, the British government ended the benefit-trust gravy train. Sarao paid back the loans and restructured his business. Montpelier was investigated and dissolved, and about 3,000 of its customers were ordered by a judge to pay £200 million in back taxes. Fraud charges against two directors were later dropped. MacKinnon and Dupont—along with a third partner, Ryan Morgan—then founded MacKinnon Dupont Morgan, which was later reborn as MD Capital Partners. The firm describes itself on its website as a boutique private equity firm. "Basically, Navinder Singh Sarao has some extraordinary abilities with respect to pattern recognition and certain sorts of mathematical abilities, but he has some fairly severe social limitations."- Roger Burlingame of Kobre &Kim (Sarao’s lawyer) They leased an office in Mayfair, home of hedge funds, Michelin-starred restaurants and private members clubs. MacKinnon joined the Worshipful Company of International Bankers and the executive board of the Special Olympics. He and Dupont set up about a dozen companies between them, focusing on industries such as renewable energy. Dupont and MacKinnon said in their e-mail toBloombergthat they “never made, or introduced investments to projects that are purely driven by tax breaks” and that at the time they got involved in renewables there weren’t any tax incentives in place. Morgan, who left the firm, didn’t respond to a request for comment. By 2011, Sarao had trebled his assets to £42.5 million. He agreed to become an investor in an Isle of Man-based entity called Cranwood Holdings, set up to acquire land in Scotland that would one day house wind farms, according to two advisers to Sarao. Documents on the enterprise filed in the British dependency are light on detail, but the advisers say Sarao put about £12 million in Cranwood—money they say Dupont and MacKinnon could access. Dupont and MacKinnon said in their e-mail that Sarao conducted “substantial independent due diligence” before investing in Cranwood and that he approved all of its payments. One of their companies, Wind Energy Scotland, is funded by and provides project management services to Cranwood. The pair also acted as agents for more exotic ventures, such as sending divers to search shipwrecks for sunken treasure. The returns on offer were never less than impressive. Sarao, who told acquaintances he harboured aspirations of becoming a billionaire, invested in several. All were tame compared with what came next. Sometime in 2012, Sarao was introduced—again through Dupont and MacKinnon—to a squat, intense Mexican named Jesus Alejandro Garcia Alvarez, who was looking for investors for his company IXE Group. Garcia said he was the scion of a family of billionaire landowners and industrial-scale farmers with swaths of land around the world. He had arrived in Zurich from Latin America a few years earlier and had been working hard to build a reputation ever since. IXE was conceived as a one-stop shop for high-net-worth individuals, offering services ranging from asset management to event planning to advice on private schools. Then, around the time Sarao met Garcia, the company’s website underwent a radical overhaul. Gone were the concierge services. IXE was henceforth a “conglomerate of companies worldwide” involved in “agribusiness, wealth management, commodity trading and venture capital.” Articles appeared in the Swiss media profiling the mysterious young man making waves among Zurich’s business elite, including pictures of Garcia wearing a poncho over his suit, arm outstretched across Bolivian salt plains he said he owned. One newspaper put him on its annual rich list. Garcia was invited on Bloomberg TV to talk about his family’s quinoa interests, then on CNBC to discuss the “white gold rush” for lithium. Garcia had all the trappings of a successful entrepreneur: half a dozen sports cars, a small but well-appointed office in the center of Zurich, a glamorous Russian wife. He even joined the Swiss board of the Robert F. Kennedy Center for Justice & Human Rights, an organization whose US directors include Tim Cook and Martin Sheen. Garcia flew to London and met with Sarao two or three times, according to people with knowledge of the matter. In an interview on IXE’s website, Garcia laid out his pitch to investors: “We are offering alternative investment vehicles that provide constant returns to investors. The investment in real economy makes the advantages obvious—investors are benefiting from constant returns generated from actual transactions with zero speculation and zero volatility.” "Nav was always going to be the kind of person that would be legendary in some way"- Futex chairman Paolo Rossi Garcia told Sarao he would get an annual 11% return, the people said, and assured Sarao that any money he handed over would be used only as collateral, not put at risk. He also introduced Sarao to Swiss banking contacts, they said. The trader was again restructuring his business, this time around an Anguilla-based vehicle called International Guarantee Corporation. Sarao did some due diligence about IXE, according to one adviser, but he seems to have overlooked a few red flags: The company website is littered with spelling mistakes, and several executives are members of Garcia’s family. Garcia initially agreed to meet to discuss this story, then opted to respond to questions through a colleague at IXE. The colleague, Dominic Forcucci, wrote in an e-mail that Garcia hadn’t done anything improper and that IXE “properly disclosed the risks of investments” to Sarao. A lawyer representing Garcia, William Wachtel, later said that Garcia described any allegations against him as “baseless and without merit.” On 20 August 2012, documents show, Sarao agreed to give about $17 million to Garcia and his company—by far his biggest investment and a substantial chunk of his net worth. He later invested an additional $15 million, according to a person with knowledge of the matter. Even though they’d met on only a handful of occasions, he would describe Garcia to associates as a friend. Sarao may have been particularly trusting, but he wasn’t alone in buying into the IXE miracle. Former employees interviewed byBloombergdescribe Garcia as charming and, on first meeting, impressive. He offered commissions to third-party agents to send prospective investors his way, ensuring a steady stream of business and creating a buzz around the firm. In 2014, Garcia signed a deal to acquire Banca Arner, a Swiss lender in decline after allegations that it had helped former Italian Prime Minister Silvio Berlusconi hide money. To coincide with the transaction, Arner’s new marketing chief, Garcia’s wife Ekaterina, issued a press release announcing it had appointed a new chairman: Michael Baer, a great grandson of the founder of private bank Julius Baer Group and a respected figure in Swiss banking. IXE just needed sign-off by Switzerland’s financial regulator, Finma. In order to seal the deal, Finma told Garcia he’d have to come up with 20 million Swiss francs ($18.7 million) in capital and account for where it came from. After heated meetings with the regulator and the owners of Arner, Garcia offered to hand over the money in unmarked gold, according to two people with knowledge of the talks. Without a stamp, the gold was unacceptable to the regulator, and in the end Garcia walked away from the deal, leaving Baer and a raft of other new recruits frustrated and embarrassed, the people said. Baer and a spokesman for Finma declined to comment. ALSO READ |When is a corporate disaster a value pick? For the time being, though, Sarao had no cause for concern. IXE sent him periodic statements showing the interest accruing in his accounts. As ever, he was happy to let it sit there and grow. By then, Sarao’s readiness to consider almost any opportunity that offered an attractive rate of return was well-established. After another strong year in 2013, Dupont and MacKinnon introduced him to Damien O’Brien, a physically imposing Irish entrepreneur with aspirations to revolutionize the online-gaming industry. The unique selling point of O’Brien’s company, Iconic Worldwide Gaming, according to a pitch document seen byBloomberg, was that it allowed gamblers to bet on movements in currencies and securities using an interface that looked like an online casino, with a roulette wheel and buttons for “higher” and “lower” instead of red and black. The patented software was called MINDGames, short for Market Influenced Number Determination games. The concept may not have pleased Gamblers Anonymous, but the financial projections were enticing. O’Brien predicted in the pitch document that Iconic would go from a standing start to a cash balance of £110 million by the end of its third year. There were also some reassuring names on the board: Robin Jacob, a UK appeals court judge, and David Michels, a former deputy chairman of Marks & Spencer. In July 2014, documents show, Sarao invested £2.2 million in Iconic. Cranwood Holdings extended loans of an additional £1 million, according to one Sarao adviser. He was, several times over, the largest investor in the company. Dupont and MacKinnon said in their e-mail that Sarao was an experienced gambler and trader who conducted his own due diligence on the gaming sector before investing. They also said they objected when Sarao told them he planned to lend money to Iconic. O’Brien didn’t respond to requests for comment. Jacob and Michels said they were no longer board members. In the months following Sarao’s investment, O’Brien went on a campaign to increase Iconic’s profile. The company sponsored World Touring Car Championship driver Rob Huff and filmed a slick advertisement with mixed martial arts superstar Conor McGregor. O’Brien and his employees were photographed ringside or wining and dining clients. In one shot taken in Las Vegas and posted on Twitter, a line of promo girls posed in matching uniforms with Iconic logos emblazoned on their hot pants. In another, O’Brien stood next to a matte-black Rolls-Royce with the license plate DAMI3N. By the time Sarao was arrested in April 2015, he had about $50 million tied up in investments around the world, according to people with knowledge of the matter who even now aren’t positive it’s all accounted for. It was only as his lawyers tried to recoup the money that he was forced to face up to the possibility that it was gone. Sarao was released that August after his parents put up the family home as collateral against the bail of £50,000. In November of last year, following an unsuccessful extradition fight, Sarao flew to Chicago where he pleaded guilty to one count of wire fraud and one of spoofing, which entails placing bids or offers with the intention of canceling them before they’re executed. He was ordered to pay $38.4 million to the CFTC and the Justice Department, which determined that, of the money he made by day trading, only $12.8 million came from cheating the market. Sarao is scheduled to find out the length of any custodial sentence later this year. In the meantime, he has been allowed to return to Hounslow, where he is banned from trading and, despite pushing 40, placed under the care of his father. Sarao’s lawyers are no closer to getting their hands on the money beyond about £5 million seized from his trading accounts after his arrest. The CFTC and the Justice Department have joined them in the hunt, according to people close to the situation. The agencies could try to compel banks holding Sarao’s assets to give them up, but that might not be easy because most of the money is outside the US Spokesmen for the CFTC and the Justice Department declined to comment, as did Burlingame, a former Justice Department prosecutor who represents UK targets in US investigations. IXE told Sarao it would return the cash in instalments in 2015 and 2016, according to a person familiar with the matter. The deadlines came and went, but no money has been produced. Garcia is rarely seen driving his sports cars around Zurich anymore, according to former associates. In October, German magazine Brand Eins skewered what it portrayed as his outlandish claims about plots of land in Bolivia and Mexico and linked Garcia to Burton Greenberg, who’s serving eight years in a Florida prison for fraud. Former IXE employees interviewed byBloombergsay that Garcia spent whatever he brought in to fund his own lavish lifestyle and that projections he gave in presentations to Sarao, Baer and others were plucked out of thin air. Still, Garcia’s efforts to acquire a bank continue. In August, IXE announced it was buying Private Investment Bank in the Bahamas from Swiss firm Banque Cramer & Cie. The deal is scheduled to be completed this month. Garcia hasn’t been accused of any wrongdoing. Forcucci, the IXE spokesman, said the company is “working to return the money in a fair and equitable manner to its investors.” Iconic went into liquidation in January 2016. A company hired to advise it on resale options said O’Brien had underestimated the cost of breaking into the online gaming market by about £10 million. Sarao’s lawyers have been unable to retrieve his investments in Cranwood despite repeated requests, owing to its convoluted offshore ownership structure, according to a person with knowledge of the situation. Dupont and MacKinnon said in their e-mail that Wind Energy Scotland has been working to get funds to Cranwood. From their base in Berkeley Square, the pair last year started another company focused on renewable energy, Celtic Asset Management, which offers “access to a substantially higher return profile, with less capital at risk.” Meanwhile, Sarao is back in his bedroom. The computer that got him into so much trouble is gathering dust in a Washington evidence room. Depending on how much the authorities are able to recoup, he will probably spend the rest of his life paying back the money he owes. If they really want it, they could always lift the trading ban, one associate quips: He’d make it back in no time.Bloomberg http://www.livemint.com/Money/TYUUt...er-Navinder-Singh-Sarao-went-from-genius.html
1 CFTC agrees non-prosecution agreements with three ex-Citigroup Global Markets traders Fri, 30/06/2017 - 10:38 Tags : Legal & Regulation Trading & Execution The US CFTC has entered into non-prosecution agreements with the former Citigroup Global Markets traders – Jeremy Lao of New York, New York, Daniel Liao (of Minato-Ku, Japan, and Shlomo Salant of New York, New York. In their non-prosecution agreements, Lao, Liao, and Salant each admits that he engaged in the unlawful disruptive trade practice of “spoofing” (bidding or offering with the intent to cancel the bid or offer before execution) in US Treasury futures markets while trading for Citigroup Global Markets Inc. (Citigroup) in 2011 and 2012. The non-prosecution agreements emphasize Lao’s, Liao’s, and Salant’s timely and substantial cooperation, immediate willingness to accept responsibility for their misconduct, material assistance provided to the CFTC’s investigation of Citigroup, and the absence of a history of prior misconduct. CFTC Director of Enforcement James McDonald says: “I am pleased to announce the first non-prosecution agreements entered into by the Commission, which I expect will be an important part of the Division’s cooperation program going forward. Non-prosecution agreements like these give the Division a powerful tool to reward extraordinary cooperation in the right cases, while providing individuals and organisations strong incentives to promptly accept responsibility for their wrongdoing and cooperate with the Division’s investigation. “For many types of complex cases, there is simply no substitute for cooperating witnesses, who can tell the inside story of the fraud or misconduct at issue. Used properly, this type of first-hand knowledge can help the Division identify more culpable wrongdoers, hold them accountable, and further protect customers and the integrity of the markets. That’s exactly what happened here: These traders readily admitted their own wrongdoing, identified misconduct of others, and provided other valuable information, all of which expedited our investigation and strengthened our cases against the other wrongdoers.” The non-prosecution agreements set forth how each trader employed a spoofing strategy that involved entering a large brief order (with the intent to cancel the large order before execution) on the opposite side of a smaller order (that each wanted to trade) in the same or a correlated market. Lao, Liao, and Salant used the spoofing strategy to get their smaller orders filled (and filled more quickly) at the prices they wanted. The agreements also detail numerous incidents of unlawful conduct at Citigroup, to which the traders admitted. On 19 January, 2017, the CFTC announced a settlement with Citigroup for spoofing and related supervision failures and imposed a USD25 million civil monetary penalty. On 30 March, 2017, the CFTC announced settlements with former Citigroup traders Stephen Gola and Jonathan Brims for spoofing and imposed civil monetary penalties of USD350,000 and USD200,000, respectively, along with six-month trading bans. from Hedgeweek
Traders Arrested In Futures Spoofing Probe https://www.zerohedge.com/news/2018-01-29/traders-arrested-futures-spoofing-probe
US regulators to fine UBS, Deutsche Bank, HSBC for 'spoofing' and manipulation: Sources https://www.cnbc.com/2018/01/29/us-...bc-for-spoofing-and-manipulation-sources.html