A futures trader was arrested in Britain for his alleged involvement in the "flash crash" of 2010 in which the Dow Jones industrial average plunged 600 points in five minutes.
After the arrest Tuesday of Navinder Singh Sarao, American authorities — who are seeking Sarao's extradition — unsealed a federal criminal complaint in Chicago charging him with multiple counts of fraud and manipulation.
The complaint says Sarao, 37, used an automated trading program to manipulate the market for E-Mini S&P 500 futures contracts on the Chicago Mercantile Exchange.
The flash crash rattled investors and left many wondering if the stock market was rigged against them. Regulators eventually traced the catalyst to trading in E-Mini S&P 500 futures.
High frequency traders use computer programs to buy and sell securities in milliseconds, scooping up tiny profits that quickly accumulate given their large volume of trades. High frequency traders now represent most of buying and selling in stock markets. They were the subject of the bestseller "Flash Boys," by Michael Lewis.
Saroa's manipulation of trades "earned him significant profits," a statement from the U.S. Department of Justice alleges.
The name of a defense attorney for Sarao who could comment on the allegations wasn't available in the court documents unsealed in Chicago.
The May 6, 2010, flash crash led to panicky trading, and the Dow eventually closed 348 points lower. The episode dented the confidence of many investors and prompted new federal regulations to try to avoid a repeat.
Since the 2010 flash crash, technical snafus have led to a series of other trading troubles, including a botched initial public offering of Facebook in 2012 that delayed its first trade. Regulators last year adopted a rule requiring routine testing of trading systems run by exchanges.
The United States is seeking Sarao's extradition, the Department of Justice statement says.
Sarao is charged with one count of wire fraud, 10 counts of commodities fraud, 10 counts of commodities manipulation and one count of "spoofing." Spoofing involves bidding with the intent of quickly canceling the bid.