The Wild $50M Ride of the Flash Crash Trader
Bloomberg Originals・18 minutes read
A British trader named Navinder Singh Sarao manipulated the market during the 2010 flash crash, allegedly making $40 million and causing a trillion-dollar loss. Despite facing legal troubles and a potential 380-year sentence, Navinder pleads guilty, is extradited to the U.S., and receives a lenient one-year house arrest sentence.
Insights
- Navinder Singh Sarao, a skilled trader, manipulated the market using his own algorithm during the 2010 flash crash, causing a trillion-dollar loss before being accused of illegal trading practices by U.S. regulators.
- Despite facing severe legal consequences and financial troubles, Navinder pleads guilty, cooperates with authorities, and receives a lenient sentence of house arrest due to his Asperger's diagnosis, highlighting the complex intersection of financial crime, mental health, and legal outcomes.
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Recent questions
What caused the 2010 flash crash?
Market manipulation by Navinder Singh Sarao.
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Summary
00:00
"Navinder Singh Sarao: The Flash Crash Trader"
- On May 6th, 2010, the U.S. stock market and futures market experienced a sudden crash, wiping a trillion dollars off American companies' value in five minutes.
- Navinder Singh Sarao, a British trader, was accused of manipulating the market during the 2010 flash crash, allegedly making $40 million.
- Navinder, a working-class kid with a talent for arithmetic, started his trading career in a small firm called Futex, where he excelled in predicting market movements.
- During the global financial crisis, Nav made a significant profit by betting on government intervention in the market, turning $2 million into $15 million.
- Frustrated by high-frequency traders, Nav decided to build his own robot to manipulate the market, making substantial profits daily.
- On May 6, 2010, Nav used his algorithm to pump sell orders into a volatile market, making $950,000 before shutting down his computer.
- Shortly after Nav stopped trading, the market experienced a sudden and unprecedented fall, known as the flash crash, wiping out a trillion dollars in value.
- U.S. regulators later accused Nav of engaging in illegal trading practices, such as spoofing and layering, artificially affecting security prices.
- Another day trader in Chicago noticed irregularities in the market on the day of the flash crash, leading to the discovery of Nav's manipulative activities.
- In 2015, Nav was arrested by police officers following a judge signing an arrest warrant, marking the beginning of his legal troubles.
16:13
"Trader's downfall: Arrest, trial, and house arrest"
- Two prosecutors and two FBI agents plan to arrest a criminal mastermind named Navinder at a McDonald's near his house in Hounslow.
- Navinder is found in bed at his home, arrested, and taken away, expressing a desire to record a football match before leaving.
- Navinder, a successful trader idolized by many, faces 22 criminal counts totaling 380 years in prison, with bail set at 5 million pounds.
- Navinder's money, including profits from trading, is potentially lost due to risky investments, leaving him in financial trouble.
- Navinder pleads guilty after being extradited to the U.S., with authorities acknowledging his cooperation and Asperger's diagnosis.
- Navinder is sentenced to a year of house arrest, having lost his fortune but continuing his simple lifestyle in Hounslow.
