Incredible that it has taken 10 years for this case to be resolved. Still, he was only charged 5 years after the event apparently.
He caused the market to tank by billions of value but he only made $900k.
It is not like billions of dollars of value are destroyed when investors sell stock. It sounds like the market had a crash as they tend to sometimes do and in this case the authorities decided it was this guy who did it! I think that analysis is quite tenuous. Anyone who sold stock participated in the crash. It seems nuts to try to assign blame.
Yeah, how much the market tanks is fairly irrelevant since it's just a paper loss and will pop right back. More interesting is how much money various actors made/lost.
Anyone who bought it, just as much. Heck, anyone who didn't buy it, as well. If more people had bought quicker, the price couldn't have declined, could it?
If you read his reply / notes to the sec, he states how he was able to place orders without being front run. He asked developers to amend sierra chart. As a result, if placing a large contract order, rather than see price tick away from it he got instant fills.
Ive zero doubt this is why he was fingered. Taking from the hf funds.. who think they have some right to impose a defacto tobin tax on transactions and justify it by calling themselves "liquidity providers!" He is guilty of spoofing, but the flood is caused by bots, or when they stop playing. He mentions his networth was constructed mostly over 50 days. On ' normal days ' you have to contend with smaller ranges where entries are key and those sort of intant fills are a massive advantage. Of course since he documented it the cat got out of the bag, many that had used this method were super annoyed!
Bitmex seems to be the new wild west these days, all those techniques are used and more with 0 accountability
I'm surprised this article doesn't mention the lengths he went to hide his money using shell companies. Makes me question the "he regarded trading as a video game in which the object was to compile points not money" narrative. (on the flipside, if I ever get arrested for manipulating markets, I'm hiring this guy's lawyer)
Per the official criminal complaint document:
Around the time of the Flash Crash, SARAO took significant steps to protect his assets. In late April 2010, SARAO established a new entity, Nav Sarao Milking Markets Limited, which was incorporated in Nevis. SARAO appears to have created this company as part of a tax avoidance strategy pursuant to which he also established, in 2012, International Guarantee Corporation, incorporated in Anguilla.[1]
He was trying to minimize his tax bill. He hired a tax consultant who ended up being fraudulent. This same consultant also introduced him to other fraudsters who extracted money from Sarao.
People are spoofing orders on big exchanges today, without even trying hard to cover it. If you have access to tick level market data and a bit of time you can find clear spoofing patterns fairly easily. Not on that scale, but enough to make money to pay some bonuses for sure
The autism bit aside, it looks like why they got him in the first place was that a technique he used (spoofing) was illegal in the US.
Given he lives in England why was he extradited to the US? Is the summary that US has enough political power to have anyone who breaks US law wherever they are situated extradited and tried here?
He was extradited to the US because there is an extradition treaty that gives the US the power to extradite people from the UK for meeting a reasonable suspicion test that they committed a crime in the US that is a crime in both countries and carries a sentence of at least a year.
The treaty is reciprocal. The UK has an equivalent right with respect to people in the US who committed a crime in the UK who meet a probable cause test. An independent review concluded that the two tests used in the two countries are worded differently but effectively equivalent.
He was not just minding his own business in the UK doing something legal there but not legal in the US; He was interacting with US Markets, hence the US Jurisdiction.
With many exceptions, don't most developed countries respect each other's laws? Certainly, if someone commits a traditional crime (burglary, assault, etc.) and flees to another country, they are usually extradited. In the modern world where you can commit electronic crimes without being physically present, it's harder to compile enough evidence against the accursed remotely to justify extradition, but it certainly happens regularly.
Yes, exactly. This guy never left the uk, yet he committed a us crime? If China had this power they could extradite almost every single American who watches porn. The real fallacy is believing that laws have reason and logic behind them, that they are fair. Once you go down that path, you're done for. Once you realize that laws have no logic and their enforcement even less, you realize most criminals, like the one convicted in this story, just happen to be unlucky. Whether they actually harmed society is irrelevant and usually unknown. This is a perfect example of that. The machine that goes by the name "justice" is anything but and will chew out and spit anyone who gets in its way, regardless of facts, what happened, or even laws. The only sane thing is to stay out of its way, but once caught within, nothing matters.
Clearly, this sets an expectation that if you live in a country with extradition treaties with the US, you better be rich enough to afford a US lawyer or smart enough to understand all of its countless number of laws on every level. In other words, you just need to do something impossible. Surely that shouldn't be a problem should it?
That's a good way of putting it, because in a recent manslaughter case the US citizen (driving on the wrong side of the road) flew home on diplomatic immunity (a familial extension, not even the diplomat herself) and the US has refused extradition.
I think the immunity was eventually deemed not to apply (or at least to be questionable) but even if not there was precedent of a Briton's immunity being waived for extradition to America; a favour not repaid in this case.
Essentially yes. The SDNY especially has a long arm and uses it aggressively. The US is the world police, although other countries are responding now. I actually think this is a major reason why blockchain and stablecoins will succeed longterm in becoming global financial rails - the US has weaponized the dollar and the dollarized banking system, which is pushing alternatives to develop out of genuine need.
I AM totally confused by this as well. We can't have it both ways. Let's think about this in a COMPLETELY different perspective.
Take elections as an example. Our 2016 elections were apparently never hacked, but there's a lot of conversation going on right now about "Russian Interference" but we're not specifically arresting Russians are we?
So what makes it OK for someone in a country we don't have extradition treaties with to just let them off the hook vs a country we do?
Seems fair. All those guys who caused the 2008 crash, which actually hurt hundreds of millions of people, got sentenced too, so equality before the law and all that.
Oh wait, actually they were "punished" by being bailed out with billions of public dollars.
Well its all fun and games until the next revolution...
I am very unfamiliar with how the financial market works, maybe someone here on HN can answer this question:
How can a single person with an internet connection (that's my understanding of the 'from his parents home' part) trigger an event that causes US markets to crash and wipe (albeit temporarily) billions of dollars?
I mean, this guy was 'only' in it for the money. Could someone with much worse motives just trigger a crash like this on demand?
In trading there is a queue for buys and sells, marked at quantity and price. This describes an attribute for that market called liquidity.
I have, at a given timestamp, a queue of orders that must be fulfilled in accordance with a strict set of rules.
By playing the rules and advertising bids with a lowlatency connection fast enough to impact the bid price, whilst canceling and not fulfilling that order, say 250us later. You can make a position to take advantage of that artificial price move that you caused.
I think the real issue not addressed is that the system is so flawed, that a "rogue trader" could mess with the market.
Let's imagine the typical US villain, Russia, North Korea, blah, blah. Let's say they have a few of their folks figure out weaknesses in the trading system then trade and then trigger a bunch of flash crashes everyday for a week or more. What will that do the market? How much billions would be lost?
The fact that it was only a flash crash and not a crash, I think actually shows the strength of the system. No one really panicked. If a flash crash happened every week, they would just slow down trades and push more to specialists. I don't think it would be as catastrophic as one might think. It would be a minor shake up.
The guy is 41 years old and lives with his parents in the same bedroom he had as a kid. He has never been able to perform basic tasks like doing his own laundry or otherwise properly caring for himself. In addition, he spent essentially none of the money - the court case is clear on that point - and he was vulnerable enough that all of the funds were taken from him by fraudsters.
Sure he did he's not stupid he understands fucking with the market has effects on people. Autistic people have a different sense of morality. Acting like an autistic genius can't understand that doing illegal things which contributes to the stock market crashing for the sake of profit is bad... Is mostly infantilizing.
I mean his lawyer argued that but his lawyer is trying to exploit people like yourself.
I disagree that it's the sole case, and also fail to see the relevance: Sarao is autistic, according to his own defense attorneys, and y'know, he probably is.
It's kind of a sensational thing to add to a headline, but that's how headlines have always worked.
“helped trigger a U.S. stock market “flash crash”” is IMHO just an exaggeration typical for U.S. justice: “kid better cooperate with us or you’ll get millions of years in prison.”
He earned 900k on that day. It doesn’t seem plausible.
I'm not saying it isn't the case here, I've no idea (and the little I've read of his backstory is believably indicative), but this autism or Asperger's defence seems to be being raised every time a hacker gets arrested.
It seems to be becoming the new "depression" in leniency arguments hitting the headlines, at least for tech related miscreants.
I’ve watched plenty of prison TV shows and it would indeed be a far worse punishment for such a person and should very much be considered seriously by the courts in sentencing and bail hearings.
>> His lawyers said the time Sarao spent in jail in Britain was "unbearable" because of his autism, saying it amounted to "a torture of sensory stimulation, sleep deprivation and forced socialization," and that he became suicidal. They said they were concerned that Sarao may not be able to survive another stint behind bars.
His autism is clearly not on the mild side of the spectrum. He lives at home with his mom even as an adult and rarely leaves his room.
The courts are entirely capable of understanding this context, compared to say someone with a mild form of autism who can still be functionally social in forced situations. Not to mention when considering intent and motivation behind the crime (which a severe case of autism can no doubt play a role) during sentencing plus their willingness to accept fault.
But ultimately this person also returned $12M in funds me made from the loophole, was a first time offender with a stable future, and helped them catch other nefarious traders. So even without the autism stuff he had a very good argument against any prison time.
The idea that a mental deviation from the norm being used to explain someone's deviation from the norm is some sort of convenient excuse as you seem to imply doesn't lead to a fair society for everyone, just one where everyone who does not deviate gets to sit on a nice cushy throne while taking from the people who do.
[+] [-] crazypyro|6 years ago|reply
Interestingly, he also lost his entire $50 million fortune to a bunch of terrible investments, including some downright frauds.
Related article (goes into details about how he lost his money): https://www.livemint.com/Money/TYUUtwYOj0VIPhFFyLICQM/How-fl...
[+] [-] crazypyro|6 years ago|reply
https://www.sec.gov/news/studies/2010/marketevents-report.pd...
[+] [-] etaioinshrdlu|6 years ago|reply
He caused the market to tank by billions of value but he only made $900k.
It is not like billions of dollars of value are destroyed when investors sell stock. It sounds like the market had a crash as they tend to sometimes do and in this case the authorities decided it was this guy who did it! I think that analysis is quite tenuous. Anyone who sold stock participated in the crash. It seems nuts to try to assign blame.
[+] [-] im3w1l|6 years ago|reply
[+] [-] perl4ever|6 years ago|reply
Anyone who bought it, just as much. Heck, anyone who didn't buy it, as well. If more people had bought quicker, the price couldn't have declined, could it?
[+] [-] CRUDite|6 years ago|reply
[+] [-] thebruce87m|6 years ago|reply
[+] [-] frandroid|6 years ago|reply
You just blew my mind there. Of course!
[+] [-] jb775|6 years ago|reply
[+] [-] jb775|6 years ago|reply
Per the official criminal complaint document:
Around the time of the Flash Crash, SARAO took significant steps to protect his assets. In late April 2010, SARAO established a new entity, Nav Sarao Milking Markets Limited, which was incorporated in Nevis. SARAO appears to have created this company as part of a tax avoidance strategy pursuant to which he also established, in 2012, International Guarantee Corporation, incorporated in Anguilla.[1]
[1] https://www.justice.gov/sites/default/files/opa/press-releas...
[+] [-] crazypyro|6 years ago|reply
[+] [-] edm0nd|6 years ago|reply
Yeah that is 100% lawyer speak haha. Smart move tbqh.
[+] [-] jedberg|6 years ago|reply
This fits with the description of getting more points. After he got the points, he wanted to keep more of them, so he figured out a way to do that.
[+] [-] kyleblarson|6 years ago|reply
[+] [-] aldanor|6 years ago|reply
[+] [-] james-imitative|6 years ago|reply
[+] [-] swishbroom|6 years ago|reply
The futures exchange wrote to Sarao on the day of the flash crash, telling him to stop spoofing, and he called them back "and told em to kiss my ass."
https://www.bloomberg.com/opinion/articles/2015-04-21/guy-tr...
https://www.bloomberg.com/opinion/articles/2020-01-15/it-s-n...
https://www.bloomberg.com/opinion/articles/2020-01-29/goldma...
[+] [-] safog|6 years ago|reply
Given he lives in England why was he extradited to the US? Is the summary that US has enough political power to have anyone who breaks US law wherever they are situated extradited and tried here?
[+] [-] btilly|6 years ago|reply
The treaty is reciprocal. The UK has an equivalent right with respect to people in the US who committed a crime in the UK who meet a probable cause test. An independent review concluded that the two tests used in the two countries are worded differently but effectively equivalent.
[+] [-] henryfjordan|6 years ago|reply
[+] [-] jessriedel|6 years ago|reply
https://securityboulevard.com/2018/04/do-cybercriminals-ever...
[+] [-] mnm1|6 years ago|reply
Clearly, this sets an expectation that if you live in a country with extradition treaties with the US, you better be rich enough to afford a US lawyer or smart enough to understand all of its countless number of laws on every level. In other words, you just need to do something impossible. Surely that shouldn't be a problem should it?
[+] [-] twodave|6 years ago|reply
[+] [-] OJFord|6 years ago|reply
I think the immunity was eventually deemed not to apply (or at least to be questionable) but even if not there was precedent of a Briton's immunity being waived for extradition to America; a favour not repaid in this case.
So yes, 'political power' indeed.
[+] [-] seibelj|6 years ago|reply
[+] [-] james-imitative|6 years ago|reply
This scares me a great deal. Totally bonkers totalitarianism from a rogue state.
[+] [-] rhacker|6 years ago|reply
Take elections as an example. Our 2016 elections were apparently never hacked, but there's a lot of conversation going on right now about "Russian Interference" but we're not specifically arresting Russians are we?
So what makes it OK for someone in a country we don't have extradition treaties with to just let them off the hook vs a country we do?
In other words, the world is TOTALLY BONKERS.
I mean specifically, am I breaking a law in the next sentence in China and should be arrested and put in a prison camp in CHINA for this: So this happened: https://en.wikipedia.org/wiki/1989_Tiananmen_Square_protests
[+] [-] epicgiga|6 years ago|reply
Oh wait, actually they were "punished" by being bailed out with billions of public dollars.
Well its all fun and games until the next revolution...
[+] [-] LeonM|6 years ago|reply
How can a single person with an internet connection (that's my understanding of the 'from his parents home' part) trigger an event that causes US markets to crash and wipe (albeit temporarily) billions of dollars?
I mean, this guy was 'only' in it for the money. Could someone with much worse motives just trigger a crash like this on demand?
[+] [-] RobRivera|6 years ago|reply
I have, at a given timestamp, a queue of orders that must be fulfilled in accordance with a strict set of rules.
By playing the rules and advertising bids with a lowlatency connection fast enough to impact the bid price, whilst canceling and not fulfilling that order, say 250us later. You can make a position to take advantage of that artificial price move that you caused.
This is called spoofing.
[+] [-] segmondy|6 years ago|reply
Let's imagine the typical US villain, Russia, North Korea, blah, blah. Let's say they have a few of their folks figure out weaknesses in the trading system then trade and then trigger a bunch of flash crashes everyday for a week or more. What will that do the market? How much billions would be lost?
[+] [-] partiallypro|6 years ago|reply
[+] [-] thecleaner|6 years ago|reply
[+] [-] RickJWagner|6 years ago|reply
[+] [-] james-imitative|6 years ago|reply
The irony is that he had millions in assets in the first place. Lol.
[+] [-] mdg9149|6 years ago|reply
[deleted]
[+] [-] grandridge|6 years ago|reply
[+] [-] lonelappde|6 years ago|reply
[+] [-] alasdair_|6 years ago|reply
[+] [-] onetimemanytime|6 years ago|reply
(A child can pull the trigger that kills the person, but maybe he was told that pulling the trigger will make the person laugh...or whatever.)
[+] [-] TheOperator|6 years ago|reply
I mean his lawyer argued that but his lawyer is trying to exploit people like yourself.
[+] [-] james-imitative|6 years ago|reply
[+] [-] thanatropism|6 years ago|reply
[+] [-] samatman|6 years ago|reply
It's kind of a sensational thing to add to a headline, but that's how headlines have always worked.
[+] [-] acqq|6 years ago|reply
He earned 900k on that day. It doesn’t seem plausible.
[+] [-] noident|6 years ago|reply
I would say in spite of that that this is one of those rare cases where the justice system comes back with a fair sentence.
[+] [-] trhway|6 years ago|reply
[+] [-] mellosouls|6 years ago|reply
It seems to be becoming the new "depression" in leniency arguments hitting the headlines, at least for tech related miscreants.
[+] [-] dmix|6 years ago|reply
>> His lawyers said the time Sarao spent in jail in Britain was "unbearable" because of his autism, saying it amounted to "a torture of sensory stimulation, sleep deprivation and forced socialization," and that he became suicidal. They said they were concerned that Sarao may not be able to survive another stint behind bars.
His autism is clearly not on the mild side of the spectrum. He lives at home with his mom even as an adult and rarely leaves his room.
The courts are entirely capable of understanding this context, compared to say someone with a mild form of autism who can still be functionally social in forced situations. Not to mention when considering intent and motivation behind the crime (which a severe case of autism can no doubt play a role) during sentencing plus their willingness to accept fault.
But ultimately this person also returned $12M in funds me made from the loophole, was a first time offender with a stable future, and helped them catch other nefarious traders. So even without the autism stuff he had a very good argument against any prison time.
[+] [-] krageon|6 years ago|reply
The idea that a mental deviation from the norm being used to explain someone's deviation from the norm is some sort of convenient excuse as you seem to imply doesn't lead to a fair society for everyone, just one where everyone who does not deviate gets to sit on a nice cushy throne while taking from the people who do.