LONDON (Reuters) - The U.S. request to extradite London-based trader Navinder Sarao, accused of helping to spark the 2010 Wall Street “flash crash”, is “false and misleading” because it misrepresented the way markets work, his lawyer said on Thursday.
Sarao is wanted by U.S. authorities after being charged with 22 criminal counts including wire fraud, commodities fraud, commodity price manipulation and attempted price manipulation.
The 36-year-old, who lives and worked at his parents’ modest home near London’s Heathrow airport, is accused of using an automated trading program to “spoof” markets by generating large sell orders that pushed down prices.
He then canceled those trades and bought contracts at lower prices, prosecutors say. The flash crash saw the Dow Jones Industrial Average briefly plunge more than 1,000 points, temporarily wiping out nearly $1 trillion in market value.
Sarao’s team are looking to block extradition on the grounds that the U.S. charges would not be offences under English law, and if they are, that he should be tried in Britain.
At a hearing on Thursday to consider whether a U.S. trading expert could give evidence when the case is decided next year, Sarao’s lawyer James Lewis said his testimony was needed to debunk the U.S. extradition request because it demonstrated there was nothing unusual in traders cancelling orders.
“Americans had to create the crime of spoofing,” Lewis told London’s Westminster Magistrates’ court, citing a report by Professor Lawrence Harris from the Marshall School of Business at the University of Southern California.
“The (U.S. extradition) request is false and misleading,” he added. “It’s simply not the reality of what happens in any market. It’s arrant nonsense.”
Mark Summers, representing the U.S. authorities, said they were not suggesting cancelling trades was in itself wrong, but that Sarao had never planned to execute the orders he had posted.
“His intention was to manipulate the market process by creating a false impression of liquidity. It was bogus from the outset,” Summers said, adding the United States disputed the report by Professor Harris, a former Chief Economist at the U.S. Securities and Exchange Commission.
Harris had also given a differing views on the issue on other occasions, Summers told the court.
District Judge Quentin Purdy indicated he would allow some of Harris’s report to be considered at the full extradition hearing next February, but agreed to a further hearing on Dec. 18 to allow a detailed U.S. response to be taken into account.
Editing by Stephen Addison