
Autistic futures trader who triggered flash crash spared prison - prostoalex
https://abcnews.go.com/US/wireStory/autistic-futures-trader-triggered-crash-spared-prison-68599310
======
crazypyro
This is a fall guy for the flash crash. Yeah, he was spoofing orders, but so
were a bunch of other people. Read the SEC report on the flash crash.

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...](https://www.livemint.com/Money/TYUUtwYOj0VIPhFFyLICQM/How-flash-crash-
trader-Navinder-Singh-Sarao-went-from-genius.html)

~~~
crazypyro
Here's the SEC report I mentioned.

[https://www.sec.gov/news/studies/2010/marketevents-
report.pd...](https://www.sec.gov/news/studies/2010/marketevents-report.pdf)

------
etaioinshrdlu
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.

~~~
im3w1l
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.

~~~
zaphirplane
The market tanks because the stocks that make the index have dropped, a stock
drops when someone is selling/buying at a lower price. Therefore someone sold
at a lower price.

Perhaps those that sold at a lower price purchased another stock also at a
lower price and there is an assumption the universe will balance it out. But
stocks drop at different % some institutions may choose to move to cash or
another commodity temporarily. I don’t expect it’s a zero sum

That is what I know, am I missing something ?

~~~
roenxi
A person who buys/sells the stock is responsible for their decision and it is
no concern to anybody else if they are making or losing money. Particularly a
flash crash. If they didn't want a stupid algorithm making their decisions for
them they shouldn't have used a stupid algorithm.

I can understand the exchange rolling back half an hour of trading or whatever
and calling it a wash. The idea that a trader is somehow liable for something
seems absurd. Only thing he is guilty of is annoying powerful people.

~~~
gorgoiler
Since the 80s it has been an integral part of society (at least in the UK and
US) for citizens to invest their own money on the stock market — where “owning
shares is as common as owning a car”:

[https://www.margaretthatcher.org/document/106145](https://www.margaretthatcher.org/document/106145)

Having protections in place to guard against market manipulation is a facet of
this policy where all citizens are now traders (and not just a select group of
well educated, well steeled stock market professionals.)

I don’t defend this policy, but I see why the former leads to the latter.

Another good reason to enforce a level playing field in capital markets comes
about from another backbone of the 80s and 90s: placing national
infrastructure like power, water, and pensions in the hands of private
companies traded on the stock market, who need some form of protection on
their share price.

~~~
ForHackernews
Was this "market manipulation", or just dumb bots doing what they do?

I'm a normal citizen who holds shares. I remember I got an email alert when
the flash crash happened, had a minor heart attack, and then reminded myself
that I'm investing for the long term and it doesn't matter what the market
does on any one particular day. In that case, it wasn't even a whole day
before my portfolio had recovered.

Markets need to be fair and transparent, but you can't save people who panic-
sell in a crash.

~~~
perl4ever
You can't save anyone who gets their idea of a security's value entirely from
the price, rather than the other way around. That's the root problem.

------
CRUDite
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

~~~
jb775
Can you post a link to his reply/notes to the SEC?

~~~
crazypyro
I can't find the original source on bloomberg, but this includes his emails to
CTFC (the relevant regulator for e-mini futures)

[https://www.businessinsider.com/emails-sent-by-trader-
navind...](https://www.businessinsider.com/emails-sent-by-trader-navinder-
sarao-2015-4)

------
jb775
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]

[1] [https://www.justice.gov/sites/default/files/opa/press-
releas...](https://www.justice.gov/sites/default/files/opa/press-
releases/attachments/2015/04/21/sarao_criminal_complaint.pdf)

~~~
crazypyro
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.

------
kyleblarson
Clearly he's a fall guy, everyone was spoofing orders. This guy is likely a
hero over on r/wallstreetbets.

~~~
aldanor
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

~~~
ianai
I wonder if that’s contributing to what seems like a market that can’t go
down.

~~~
joejerryronnie
There’s just not many other places to put your money to work right now.

------
swishbroom
Here's Matt Levine's analysis on his newsletter.

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/2015-04-21/guy-trading-at-
home-caused-the-flash-crash)

[https://www.bloomberg.com/opinion/articles/2020-01-15/it-
s-n...](https://www.bloomberg.com/opinion/articles/2020-01-15/it-s-not-
insider-trading-if-the-president-does-it?sref=1kJVNqnU)

[https://www.bloomberg.com/opinion/articles/2020-01-29/goldma...](https://www.bloomberg.com/opinion/articles/2020-01-29/goldman-
has-some-boring-plans)

------
safog
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?

~~~
twodave
Ostensibly he was extradited because among the victims of the crime were U.S.
corporations.

~~~
goatinaboat
_he was extradited because among the victims of the crime were U.S.
corporations._

I don’t know why this was downvoted. Recent events have proved that if the
victim is a British motorcyclist, for example, extradition does not apply.

[https://www.bbc.co.uk/news/uk-england-
northamptonshire-51228...](https://www.bbc.co.uk/news/uk-england-
northamptonshire-51228262)

~~~
lonelappde
That's not because the victim was a person. That's because the perpetrator was
an elite -- a member (via marriage) of the regime that is protecting her.

------
epicgiga
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...

------
LeonM
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?

~~~
RobRivera
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.

This is called spoofing.

~~~
LeonM
Thanks for the explanation!

But the article says that Sarao did this from his parent's house. Would a
residential internet connection be sufficient to perform such spoofing?

The way you describe it, spoofing sounds like an easy way to make money, as
long as you have enough capital and a fast internet connection, like with
arbitrage. But there must be some limitation to this, right? Could anyone
(like me) do spoofing and cause a flash crash?

~~~
RobRivera
It's possible to buy a colo at an exchange for $$$ and push to prod from the
house. Algorithmic trading is...algorithmic. trade decisions are encoded into
the algorithm, decisions based on market feed info such as last executed
orders, volume, etc.

The idea is you take a previous trading intraday execution data set, profile
out volume per second, execution prices, etc. Then encode a proprietary
datascience backed decision tree for dispatching buy sell messages.

No human in theol loop.

------
segmondy
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?

~~~
partiallypro
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.

~~~
andreilys
Tell that to all the traders whose stop losses were triggered due to flash
crashes

~~~
ycombobreaker
that value wasn't "lost" from a holistic sense, but transfered to the
counterparty. It's a good argument for why stop orders suck, though. the
triggering mechanism is too easy to spoof in volatile/illiquid conditions.

------
thecleaner
So if investors and their smart algorithms act like dumb sheep how is it this
guys fault ?

------
RickJWagner
I think I see a movie on the horizon....

------
james-imitative
> Before his own indictment, Sarao himself lost millions in assets to
> fraudsters who found him uniquely gullible and easy to cheat, his lawyer
> said.

The irony is that he had millions in assets in the first place. Lol.

------
grandridge
If anyone thinks this guy triggered the flash crash, ive got some stuff I want
to sell you

------
lonelappde
"autism" here is just a ploy the defense is trying to weasel out of
punishment, a soft phony "insanity" defense.

~~~
alasdair_
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.

------
onetimemanytime
I guess they had to charge him and then agree to no jail. But still, I wonder
if he _really_ knew right from wrong.

(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
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.

~~~
onetimemanytime
Are you a doctor...and is he your patient?

~~~
TheOperator
The person in the story may not be my patient but I've been around the block
enough times to understand WHY it is being thought that he is incapable of
moral reasoning.

I can speak to that subject without being a doctor. A doctor also in all
honesty would almost certainly have less expertise in the subject than myself
unless they were psychologists or similar.

I feel compelled to speak on the subject because the general attitude that
autistic people are fundamentally amoral, fundamentally incapable of knowing
right from wrong leads to stigma and mistreatment while not actually being
true. The very idea that you have to consult a doctor to judge if an autistic
person, not the highest functioning but far from the lowest, is capable of
moral reasoning is an idea that leads to stigma and "othering" and exclusion
and dehumanization. If I come off as aggressive it's because I see your
beliefs as personally threatening.

------
thanatropism
I feel like "autistic" may be the sole case in which wide (and improper) use
as metaphor -- compare "crippled" \-- does harm the neurodiverse.

~~~
samatman
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.

------
acqq
“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.

~~~
noident
Definitely an inflated claim by the prosecution. You cannot blame a major
market event on the actions of a single individual.

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.

------
mellosouls
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.

~~~
dmix
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.

~~~
mellosouls
Agree with most of that, but I'm commenting on what appears to be a trend in
defences, at least in ones I recall from the headlines.

~~~
dylz
I wouldn't be surprised if it was more of a trend on the demographic that
commits that type of crime too...

~~~
mellosouls
Yes, possibly.

