Spoofing Isn't a U.K. Crime, Attorney Says in Sarao Caseby
Second day of extradition hearing for Navinder Singh Sarao
Sarao charged in U.S. with fraud and market manipulation
Navinder Singh Sarao, the British trader accused of contributing to the 2010 Flash Crash, shouldn’t be extradited to the U.S. to face the charges because his alleged conduct isn’t a crime under English law, his attorney told a London court.
"There is no English crime of spoofing," trial lawyer James Lewis said on Friday, the second and final day of a hearing on Sarao’s extradition. "The key question for this court is whether the conduct of Mr. Sarao amounts to a crime if it were to happen in the U.K."
Sarao is accused by U.S. authorities of manipulating Standard & Poor’s 500 Index futures between 2010 and 2014 by using spoofing -- placing orders with no intent to execute them to fool other traders into buying or selling. His actions allegedly contributed to the almost 1,000-point plunge in the Dow Jones Industrial Average in minutes in 2010, and prosecutors allege he made $40 million over the four years.
Central to the U.S. case is the frequency with which Sarao canceled his orders. Authorities say his actions show he had no intention to complete the trades. Lewis countered this in court claiming it’s normal behavior for traders to cancel orders frequently and it would be wrong to say "by canceling more you’ve committed a crime."
Under English extradition laws, the burden of proof is on the prosecution to show Sarao’s conduct would amount to a crime in the U.K. Lewis said no one has ever been convicted of spoofing in the U.K.
Sarao, wearing a charcoal suit and pink shirt, sat in court with his head down throughout the hearing. Judge Quentin Purdy expressed concern Sarao seemed unsettled and asked if it was because of the number of media in the court. Lewis assured him Sarao was fine, although he reminded the judge that Sarao has Asperger’s Syndrome and said he was having treatment for Post-Traumatic Stress Disorder.
The 37-year-old Briton was arrested at his London home last year and spent four months in prison while he tried to obtain bail. Judge Purdy said he’ll issue his extradition ruling on March 23, almost 11 months after he was arrested.
Mark Summers, a lawyer for the prosecution, said it "would be surprising" if spoofing wasn’t deemed a crime in the U.K. under three relevant laws. He branded the defense’s expert witness, former U.S. Securities and Exchange Commission Chief Economist Larry Harris, "unimpressive." Harris appeared via video link from California on Thursday.
Summers said the U.S. was focused on the harm done by Sarao’s trading, both to his counterparties and to the reputation of American financial markets. While Sarao was in the U.K., most of the damage was on a U.S. trading platform and the case should be tried there, Summer said.
Summers said the U.K. Financial Conduct Authority carried out its own investigation and didn’t pursue charges, leading him to speculate that British authorities thought the case had more relevance to the U.S.