Flash Crash Culprit Seen as Childlike Gamer Not Fit for Prison

(Bloomberg) -- The British trader accused of helping to cause the 2010 Flash Crash that erased $1 trillion in stock market value in just a few minutes is too childlike to spend any time in prison for his securities crimes, his lawyer told a judge in Chicago.

Navinder Sarao, 41, is a guileless mathematical savant who plays markets like a computer game in his bedroom, collects stuffed animals and prefers the company of children to adults, attorney Roger Burlingame said in a 41-page court filing that paints an image of his client that falls somewhere between Rain Man and Peter Pan.

“Representing Nav has been profoundly frustrating,” Burlingame said. “He cannot turn off his autism and focus on what is important … [even] with his life on the line.”

Sarao is scheduled to be sentenced Jan. 28, about five years after he was arrested at his parents’ home, where he’d lived since childhood. Authorities say he helped start the flash crash on May 6, 2010, blasting and then canceling mammoth sell orders -- an illegal market-influencing technique known as spoofing.

The trader pleaded guilty to spoofing and wire fraud in 2016, and at the time faced 78 to 97 months behind bars under sentencing guidelines. But even the U.S. Department of Justice agrees with Burlingame that Sarao shouldn’t be jailed. The government says he is a vulnerable individual who has helped find and prosecute other cheats.

The NAVTrader

Sarao is a preternaturally gifted trader who learned his craft at an out-of-town arcade above a supermarket after applying to an advertisement in a newspaper. When algorithmic, high-speed trading with computers began to infiltrate markets, he paid a Chicago software developer to build a program he called the NAVTrader.

Despite making $70 million buying and selling futures, Sarao declined to tell his family or friends in the working-class London borough of Hounslow, Burlingame said. He was worried they would treat him differently.

Sarao entrusted more than $60 million to a series of fraudsters he’d barely met -- money that the U.S. government has so far been unable to retrieve, his lawyer said.

While Sarao was never diagnosed before his arrest, his actions and characteristics are “wholly consistent” with autism, according to Simon Baron-Cohen, an autism specialist quoted in Burlingame’s memo.

“Navinder’s lack of any concern for or use of the money he earned, and his trading obsessively, like a child trying to beat a high score on a computer game, are wholly consistent with, and a consequence of, his autism,” Baron-Cohen wrote. “He was ‘playing the game’ according to the rules he saw other traders were using, which included ‘spoofing.’”

Video Games

When he wasn’t placing trades worth tens of millions of dollars, Sarao was playing badminton in the back yard with his nephews, eating McDonald’s meals and trying to break into the top 700 players at the computer game FIFA, according to the memo. He idolized Lionel Messi, kept a stuffed tiger on his bed and wore a kurta -- a long, loose, collarless shirt -- to play soccer with his friends as it didn’t restrict his movement.

“We all start life as innocent and inquisitive beings,” Sarao’s brother, Jasvinder, wrote in a statement cited by Burlingame. “As time goes on, due to numerous factors, we lose this quality, but Nav hasn’t.”

The case is U.S. v. Sarao, 15-cr-75, U.S. District Court, Northern District of Illinois (Chicago).

To contact the reporter on this story: Liam Vaughan in London at lvaughan6@bloomberg.net

To contact the editors responsible for this story: Alan Katz at akatz5@bloomberg.net, ;David Glovin at dglovin@bloomberg.net, Steve Stroth

©2020 Bloomberg L.P.