A British day trader has pleaded guilty to spoofing and wire fraud involving the 2010 Flash Crash. Navinder Singh Sarao was accused of making $40M while spoofing the stock futures market of CME Group Inc. (NASDAQ: CME) for more than five years. He also will forfeit $12.9M of the ill-gotten gains that he made from trading. Sarao is facing a maximum of 30 years in prison. It was during the 2010 Flash Crash that a trading frenzy briefly took down nearly $1 trillion from American equities.
To face the 22 criminal charges against him for market manipulation and fraud, the day trader had to be extradited from the United Kingdom to the United States. US prosecutors accused him of rigging the futures on the S & P 500 Index.
Spoofing involves manipulating prices by placing trade orders but with no plans of executing them. The purpose is to send prices moving in one direction but then cancelling the trades prior to execution in order to make money off the prices going back to where they originally were before the manipulation.