LONDON (Reuters) - A London-based trader accused of contributing to the 2010 Wall Street “flash crash” by placing bogus orders to spoof the market lost his legal bid to stop extradition on Friday and will now be sent to the United States to face trial.

Navinder Sarao arrives at Westminster Magistrates' Court for an extradition hearing in London, Britain March 23, 2016. REUTERS/Toby Melville

Navinder Sarao, 37, who traded on the Chicago Mercantile Exchange (CME) from his parents’ home near Heathrow airport, is wanted by the U.S. authorities on 22 criminal counts of wire fraud, commodities fraud and market manipulation.

He has denied any wrongdoing and in his only public comment said he was just good at his job.

A judge initially approved his extradition in March, and on Friday his bid to launch an appeal against that decision was rejected, ending his 18-month legal fight. He will now be extradited within 28 days.

U.S. authorities say Sarao used a modified computer program to “spoof” markets by generating large sell orders that pushed down prices. He then canceled those trades and bought the contracts at the lower prices, reaping a roughly $40 million profit.

They say his actions contributed to market instability which led to the May 6, 2010 flash crash when the Dow Jones Industrial Average briefly plunged more than 1,000 points, temporarily wiping out nearly $1 trillion in market value.

Sarao’s lawyers have argued that experts have ruled out his actions as being responsible for the flash crash, and in his ruling in March, judge Quentin Purdy also cast doubt on the role the trader is alleged to have played.

However, Purdy added the flash crash was just one of the 400 trading days referred to by U.S. prosecutors when Sarao was said to have been spoofing the market.

If found guilty, the maximum U.S. sentences for the charges he faces amount to more than 350 years in prison.

But in July, a U.S. judge sentenced futures trader Michael Coscia to three years in prison after he became the first person criminally convicted of spoofing, a lighter punishment than prosecutors had sought. </s> A London-based trader accused of contributing to the 2010 Wall Street "flash crash" by placing bogus orders to spoof the market lost a legal appeal against extradition at the High Court in London on Friday and will now be sent for trial to the United States.

Navinder Sarao, who traded on the Chicago Mercantile Exchange (CME) from his parents' home near Heathrow airport, will be extradited within 28 days.

Sarao, 27, is wanted in the United States to face trial on 22 criminal counts of wire fraud, commodities fraud and market manipulation. He denies any wrongdoing.

U.S. authorities say Sarao used a modified computer program to "spoof" markets by generating large sell orders that pushed down prices. He then canceled those trades and bought the contracts at the lower prices, reaping a roughly $40 million profit.

His actions, they allege, contributed to market instability which led to the May 6, 2010 flash crash when the Dow Jones Industrial Average briefly plunged more than 1,000 points, temporarily wiping out nearly $1 trillion in market value.

The maximum U.S. sentences for the charges he faces amount to more than 350 years in prison. </s> The British financial trader accused of manipulating the US stock markets on the day of an $800bn (£565bn) “flash crash” faces extradition within 28 days after being denied permission to appeal against the order.

Navinder Singh Sarao, 37, nicknamed the Hound of Hounslow, must now be sent to America and surrendered to the US authorities.

After a two and a half hour hearing at the court of appeal in London on Friday, Lord Justice Gross and Justice Nicol denied a renewed application to appeal against extradition. Their reasons are to be given at a later date.

The counsel for the US acknowledged there was no longer a suggestion that Sarao had played a significant role in provoking the flash crash.

During the 36-minute crash, on 6 May 2010, the Dow Jones industrial average plummeted by 998.5 points – its biggest slump during a single trading session.

“This is a case about the ‘spoofing’ of the US market over five years,” counsel for the US told the high court. Spoofing is the placing of an electronic order on an exchange with the intent of giving others a false impression of market demand.

After the price reacted to that alleged deception, Sarao, who traded from his parents home in west London, is alleged to have bought or sold stock knowing he could cancel the spoof order. He is accused of making $40m from spoofing between 2009 and 2014.

Revising allegations concerning links to the flash crash, counsel for the US said: “This case is connected to the flash crash in that he was trading on the day in question.” It is accepted, however, that he had ceased trading minutes before the crash.

All legal options for Sarao in the UK have been exhausted and he must stand trial in the US on 22 counts of wire fraud, commodities fraud and market manipulation carrying a maximum combined sentence of 380 years’ imprisonment.

The initial extradition ruling was made by district judge Quentin Purdy at an extradition hearing at Westminster magistrates court in March. </s> A British financial trader accused of helping trigger a multibillion-dollar Wall Street crash from a suburban UK home is mounting a high court challenge against a decision that he can be extradited to the US to stand trial.



Navinder Singh Sarao, 37, nicknamed the Hound of Hounslow, is wanted in America over allegations that he helped cause the 2010 Wall Street “flash crash” from his parents’ home 3,500 miles away in Hounslow, west London.

He faces 22 charges, which carry sentences totalling a maximum of 380 years, over claims that he contributed to the Dow Jones Industrial Average plunging 600 points in five minutes, wiping tens of billions of pounds off the value of US shares.

US authorities claim Sarao made $875,000 (about £716,000) on 6 May 2010, the day of the crash, part of illegal earnings of more than $40mover a five-year period.

At an extradition hearing at Westminster magistrates court in March, the district judge, Quentin Purdy, ruled that Sarao could be sent to stand trial in the US.

Lawyers for the former bank worker and Brunel University student argue that his actions did not constitute a crime.

In his ruling, Purdy said: “The causes of the flash crash are not a single action and cannot on any view be laid wholly or mostly at Navinder Sarao’s door, although he was active on the day. In any event this is only a single trading day in over 400 relied upon by the prosecution.

“Essentially, has the US established that the same actions in this jurisdiction at the same time would be capable of being prosecuted for one or more offences known to the criminal law? This is not the forum for testing the evidence as in a trial. To my mind, when all is said and done, the US are correct in arguing they have shown dual criminality.”

Sarao, who is on bail, will have his challenge heard by Lord Justice Gross and Mr Justice Nicol at a hearing in London. </s> The justices, in an 8-0 decision, upheld the 2013 conviction of Bassam Salman, a Chicago man who made nearly $1.2 million trading on non-public information that came from his brother-in-law at Citigroup Inc. It was the court's first ruling in an insider trading case in two decades.

The justices held that someone who trades on non-public information provided by a friend or family member who got no tangible benefit in exchange still could be held liable for insider trading. They rejected Salman's view that he could be convicted only if his brother-in-law had received something like cash in return for any tips.

The ruling was a major victory for securities regulators and prosecutors, who for two years had been grappling with the ramifications of a ruling by a New York-based federal appeals court that some had interpreted as agreeing with Salman's position.

That ruling adopted a narrow definition of what constituted an illegal benefit to an insider, and resulted in cases being dropped or dismissed against 14 of 107 people charged by the office of Manhattan U.S. Attorney Preet Bharara since 2009.

Bharara, who has aggressively prosecuted insider trading cases, called the ruling "a victory for fair markets and those who believe that the system should not be rigged."

Bharara added that "the court stood up for common sense and affirmed what we have been arguing from the outset - that the law absolutely prohibits insiders from advantaging their friends and relatives at the expense of the trading public."

The case came on the heels of U.S. government efforts to crack down on insider trading, resulting in Galleon Group founder Raj Rajaratnam's conviction in 2011 and a $1.8 billion settlement and plea deal in 2013 with hedge fund SAC Capital Advisors LP.

Justice Samuel Alito, writing for the court, said a friend or family member could be held liable if insider information was provided as a "gift."

"In such situations, the tipper benefits personally because giving a gift of trading information is the same thing as trading by the tipper followed by a gift of the proceeds," Alito wrote.

Prosecutors said Maher Kara, a Citigroup investment banker and Salman's brother-in-law, provided tips about deals involving Citi clients to Kara's brother, who in turn tipped Salman, who made over $1.5 million that he split with another relative.

A federal jury in San Francisco in 2013 found Salman guilty of conspiracy and securities fraud charges, and he was sentenced to three years in prison.

A lawyer for Salman did not immediately respond to a request for comment.

The Supreme Court heard Salman's appeal on Oct. 5 amid competing rulings by federal appeals courts in San Francisco, where his case was heard, and New York, where a wave of insider trading prosecutions has been pursued recently.

The New York-based 2nd Circuit in 2014 overturned the conviction of two hedge fund managers, Todd Newman and Anthony Chiasson, and narrowed prosecutors' ability to pursue such cases in the process.

Salman had relied on the 2nd Circuit's ruling to argue that he could not be convicted because no proof existed that Kara received anything beneficial in return.

The San Francisco-based 9th U.S. Circuit Court of Appeals rejected that position. And in Thursday's ruling, Alito said that to the extent the 2nd Circuit's ruling could be read that way, the holding was "inconsistent" with Supreme Court precedent.

The case is Salman v. United States, U.S. Supreme Court, No. 15–628. </s> The computer activist Lauri Love will discover on Friday whether he is to be sent to the United States to face charges of hacking into the US military agencies, in the first test case since the extradition law was tightened by Theresa May.



The 31-year-old, who has Asperger’s syndrome, told Westminster magistrates court this summer that he may take his own life if he is forcibly removed to an American prison for trial.

The decision will be the first substantive test of the “forum bar”, introduced by May when she was home secretary. This allows courts to block extradition if it is in the interests of justice to have a person tried in Britain instead.



May’s reforms also narrowed the home secretary’s discretion to intervene in such highly charged cases. Introduced after a protracted political row over the case of the British hacker Gary McKinnon, the measures leave it up to the courts to decide whether risks to a suspect’s health should prevent extradition.

Love, who lives at home with his parents in Newmarket, Suffolk, is alleged to have stolen vast amounts of data from US agencies including the Federal Reserve, the Department of Defence, Nasa and the FBI in a series of online attacks in 2012 and 2013. 



His lawyers say he could receive a sentence of up to 99 years in prison if found guilty. Love and his family want him to face justice in the UK rather than the US, which he said “coerces” people into pleading guilty to get reduced sentences.

The US application to extradite him was heard in June. Giving evidence then, Love said that due to the pressure of plea-bargaining in the US justice system, more than 95% of cases did not end in trials but in guilty pleas. 



“I don’t entertain any prospects of justice in America,” he said. “If any crimes were committed, they were committed in the UK … I can’t imagine anything worse than being in a US prison.”

On Friday afternoon the judge Nina Tempia will decide whether Love should be extradited to face the possibility of three separate trials in different American courts.

His supporters say he would not be granted bail if transferred to the US. The electrical engineering student also suffers from severe eczema and depression.



The magistrates court hearing is also expected to set a date for Love’s case against the National Crime Agency over its retention of computer equipment it seized from him.

Love’s legal team is led by Ben Cooper of Doughty Street Chambers, who also acted for McKinnon during his extradition battle. </s> WASHINGTON (AP) — A unanimous Supreme Court on Tuesday sided with the government in a legal clash over the nation’s insider trading laws, a victory for prosecutors seeking to curb corruption on Wall Street.

The justices ruled that sharing corporate secrets with friends or relatives is illegal even if the insider providing the tip doesn’t receive anything of value in return.

The ruling upheld the conviction of Bassam Yacoub Salman, an Illinois man convicted of making investments based on inside information he received from a member of his extended family. It also limited the impact of a 2014 ruling from the federal appeals court in Manhattan that had raised doubts about the scope of insider trading laws.

Prosecutors have relied on a broad reading of the law to support aggressive anti-corruption efforts that have netted more than 80 arrests and 70 convictions for insider trading over several years.

Writing for the court, Justice Samuel Alito rejected arguments that insider trading prosecutions should be limited to those who make secret profits from revealing confidential data. Government officials had argued that sharing corporate secrets with friends or family is just as damaging to the integrity of financial markets.

Salman was prosecuted for earning more than $1.5 million in profits from trading on nonpublic information he received about future health care deals. The tip originated with Salman’s brother-in-law, Maher Kara, an investment banker at Citigroup Global Markets in New York. Kara passed the tip on to his own brother, Michael Kara, who then gave it to Salman.

Salman was aware that Maher Kara was the source. Kara pleaded guilty to conspiracy and securities fraud charges.

“Salman’s jury was properly instructed that a personal benefit includes the benefit one would obtain from simply making a gift of confidential information to a trading relative,” Alito said.

Alito said that Maher Kara disclosed confidential information as a gift to his brother with the expectation that his brother would trade on it. That was a breach of his duty of trust to Citigroup, Alito said, and that breach of duty continued when Salman received the information and traded on it.

Prosecutors had suffered a blow two years ago when the federal appeals court in Manhattan overturned the conviction of hedge fund managers Todd Newman and Anthony Chiasson after finding they were too far removed from inside information to be prosecuted.

The Manhattan court said Newman and Chiasson got their information through a chain of traders who didn’t have a close personal relationship with them. The ruling forced Manhattan U.S. Attorney Preet Bharara to drop some cases and put others on hold.

Alito specifically noted the Manhattan ruling and rejected any notion that an insider doesn’t violate the law unless he receives something of value when giving confidential information to a friend or relative.

Bharara said in a statement that the Supreme Court “easily” rejected the Manhattan court’s “novel interpretation of insider trading laws.”

“The Court stood up for common sense and affirmed what we have been arguing from the outset — that the law absolutely prohibits insiders from advantaging their friends and relatives at the expense of the trading public,” Bharara said. “Today’s decision is a victory for fair markets and those who believe that the system should not be rigged.”

The ruling is likely to affect high-profile hedge fund manager Leon Cooperman, who earlier this year was accused by federal regulators of illegally trading on confidential information he learned from a company executive. Cooperman had told his investors in a letter that federal prosecutors were holding off on pursuing charges until the Supreme Court ruled in the Salman case. </s> A former Reading banking director branded a "parasite" has been jailed for 11 years and three months for his part in a multi-million pound scam.

Lynden Scourfield admitted corruption and money laundering charges for his part in the fraud which left small businesses bankrupt.

The 54-year-old, also known as Gerard, admitted one count of conspiracy to corrupt, four counts of fraudulent trading and one count of conspiracy to conceal criminal property in August last year.

He was sentenced at Southwark Crown Court on Thursday, February 2 alongside four other men and one woman.

The six-year investigation called Operation Hornet is believed to be the longest and most complex case Thames Valley Police has ever dealt with.

Victims lives were "destroyed by the greed of these parasites"

The trial began on September 12, 2016 and lasted more than four months.

Senior investigating officer, Detective Superintendent Nick John, said: "The sentencing reflects the severity of the crimes and the misery they inflicted on their victims.

"Their victims were people who were trying to contribute to the economy, creating jobs and offering goods and services.

"They were normal people running small to medium sized businesses who needed support and instead had their livelihoods, and in many cases, their lives destroyed by the greed of these parasites."

Scourfield, of Whitton Avenue West in Greenford, offered to loan the companies money if they would use the extremely expensive services of some fraudulent consultants.

In exchange for bribes, Scourfield sent customers to consultancy firm Quayside Corporate Services, which was run by his co-defendants David Mills and his wife Alison, of Todenham, Moreton-in-Marsh.
• None David Mills, aged 60, was found guilty of corruption, fraudulent trading and money laundering. He was jailed for 15 years.
• None Alison Mills, 51, was found guilty of money laundering and was jailed for three and a half years.
• None Michael Bancroft, 73, of Ilmington, Shipston-on-Stour, Warwickshire, was found guilty of corruption, fraudulent trading and money laundering. He was jailed for 10 years.
• None Lynden Scourfield was found guilty of corruption, fraudulent trading and money laundering. He was jailed for 11 years and three months.
• None Mark Dobson, aged 56, of Brayfield Terrace, London, was found guilty of corruption and money laundering. He was jailed for four and a half years.
• None John Cartwright, also known as Tony, aged 72, of Knott Lane, Hyde, Cheshire was found guilty of fraudulent trading and money laundering. He was jailed for three and a half years.

The convictions are the result of one of the largest fraud investigation of its kind in the UK.

Those involved created a network of associations where businesses were exploited by their bank managers who directed them to employ the services of expensive external consultants in return for bank loans.

Det Supt John said: "Instead of offering advice and support these consultants including David Mills and Michael Bancroft would then take millions out of these companies by various means to fund lavish lifestyles.

"These consultants would also offer kickbacks and gifts to the bankers, including Lynden Scourfield, as a reward for recommending them and for continuing to lend the bank’s money to these struggling companies.

"I am pleased for the victims, and there are many affected by the criminal beahviour of this gang, that they have seen these people finally get justice and I hope that this will help them move on after waiting such a long time."

Find out more about the HBOS banking scam.

Don't forget you can keep up to date with the latest news via the free getreading app which can be tailored to receive alerts on the news you're interested in.

Download it for Apple devices here and Android devices here . </s> Bassam Salman, a Chicago grocery wholesaler, received stock tips from a friend, who had in turn received inside information from Salman’s brother-in-law, an investment banker at Citigroup. Salman made hundreds of thousands of dollars from the tips, but he was also charged with insider trading and sentenced to three years in prison. Today the Supreme Court upheld Salman’s conviction, rejecting his argument that he could not be held liable because his brother-in-law had not received any financial benefits in exchange for the inside information that he disclosed. The unanimous ruling – which came just over two months after the oral argument – was a big victory for the federal government, which had warned the justices that a ruling for Salman would lead to even more disclosures of confidential information by corporate insiders.

In a 1983 case, Dirks v. SEC, the Supreme Court ruled that a “tippee” – someone who receives confidential information from an insider and then uses the information to trade – can be held liable under insider trading laws when the insider violates his duty to shareholders by disclosing the information, which in turn depends on whether the insider receives “a direct or indirect personal benefit from the disclosure.” The court in that case noted that jurors could infer a “personal benefit” when the insider either receives something of value in exchange for the tip or “makes a gift of confidential information to a trading relative or friend.”

In Salman’s case, the U.S. Court of Appeals for the 9th Circuit ruled that, following Dirks, the jury that convicted Salman could infer that Salman’s brother-in-law, Maher Kara, had breached his duty when he passed confidential information to his brother Michael, who then relayed it to Salman. In fact, the lower court ruled, Maher’s disclosures to Michael were “precisely the gift of confidential information to a trading relative that Dirks envisioned.”

The 9th Circuit’s application of Dirks to Salman’s case, the justices held today, was proper, although the justices took care to make clear that the issue presented by this specific case was a “narrow” one. Dirks, the court explained in an opinion by Justice Samuel Alito, “makes clear that a tipper breaches a fiduciary duty by making a gift of confidential information to ‘a trading relative.’” This is so, the court continued, because “giving a gift of trading information is the same thing as trading by the tipper followed by a gift of the proceeds.” Here, the court reasoned, Maher Kara breached his duty of trust and confidence to Citigroup when he gave information to his brother, Michael, knowing that Michael would trade on it; Salman then inherited that duty and breached it when he traded on the confidential information.

The court rebuffed Salman’s contention, based on a recent decision by the U.S. Court of Appeals for the 2nd Circuit, that the insider must “also receive something of a ‘pecuniary or similarly valuable nature’ in exchange for a gift” of confidential information to family or friends. Such a requirement, the court emphasized, is “inconsistent with Dirks.” The court acknowledged that “many insider-trading cases” “involved insiders who personally profited through the misuse of trading information.” But the court seemed to attribute that fact to happenstance; it does not, the court stressed, change the test that the court “articulated and applied” in Dirks.

The court also agreed with Salman that, at least in some cases, it may be hard to determine whether an insider received a “personal benefit” from disclosing confidential information. But those hypothetical difficulties, the court emphasized, do not necessarily make the insider-trading laws so ambiguous that they violate the Constitution and require the court to overturn Salman’s conviction. Although the court left open the possibility that it might need to address that “difficult” scenario in a future case, it saw no need to do so here, because Salman’s conduct falls within the “heartland” of the conduct envisioned by Dirks.

Today’s ruling means that Salman’s conviction will stand. To a certain extent, the unanimous opinion’s relative brevity – just 12 pages – and the speed with which the eight-member court issued its decision belie the significance of the ruling. By rejecting the 2nd Circuit’s “pecuniary gain” requirement and making clear that conduct like Salman’s falls squarely within the insider-trading laws, the court took an important step in its first ruling in an insider-trading case in two decades.

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Recommended Citation: Amy Howe, Opinion analysis: Court upholds “friends and family” insider-trading conviction, SCOTUSblog (Dec. 6, 2016, 12:01 PM), https://www.scotusblog.com/2016/12/opinion-analysis-court-upholds-friends-and-family-insider-trading-conviction/
A London-based trader who traded on the Chicago Mercantile Exchange, Navinder Singh Sarao, accused of contributing to the 2010 Wall Street "flash crash" by placing bogus orders to spoof the market, fails in his legal bid to stop extradition and will now be sent to the United States to face trial where he is wanted by U.S. authorities on 22 criminal counts of wire fraud, commodities fraud, and market manipulation. A judge initially approved his extradition in March, and today his bid to launch an appeal against that decision was rejected, ending his 18-month legal fight. He will now be extradited within 28 days.