London trader arrested for alleged role in $1 trillion Wall Street tumble

A high-frequency trader has been arrested in London over his alleged role in the May 2010 “flash crash” that briefly wiped out nearly $1 trillion in market value, the first time authorities have blamed manipulation for the turbulence. The U.S. Justice Department said it had criminally charged Navinder Singh Sarao, 36, of London, with wire fraud, commodities fraud and manipulation. Sarao allegedly used an automated program to generate large sell orders that pushed down prices.

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.

Aitan Goelman, head of enforcement at the Commodity Futures Trading Commission

The case was set in motion by a whistleblower who provided the Commodity Futures Trading Commission with analysis on the trades, said Shayne Stevenson, a lawyer who represented the whistleblower. Prosecutors said the Chicago Mercantile Exchange’s self-regulatory staffers caught wind of some of Sarao’s suspicious trades as early as 2009. He reaped some $40 million between 2010 and 2014 trading the futures contracts known as “E-minis,” according to the DOJ complaint.