Accused U.S. "flash crash" trader faces London extradition hearing

By Michael Holden

LONDON, Sept 25 (Reuters) - The London-based trader accused by U.S (Other OTC: UBGXF - news) . authorities of market manipulation that helped cause the 2010 Wall Street "flash crash" is due to appear in court on Friday to fight extradition to the United States to face trial.

Navinder Sarao, arrested by British police on a U.S. warrant in April (LSE: 0N69.L - news) , has been indicted by a U.S. federal grand jury on 22 criminal counts including wire fraud, commodities fraud, commodity price manipulation and attempted price manipulation.

Sarao, who lives and worked at his parents' modest home near Heathrow airport, is accused of using an automated trading program to "spoof" markets by generating large sell orders that pushed down prices. He then cancelled those trades and bought contracts at lower prices, prosecutors say.

The flash crash saw the Dow Jones Industrial Average briefly plunge more than 1,000 points on May 6, 2010, temporarily wiping out nearly $1 trillion in market value.

U.S. prosecutors say his criminal activities netted him some $40 million profit and if convicted he faces a long jail term - the maximum sentences for the charges of which he is accused amount to hundreds of years in prison.

The 36-year-old has already spent four months behind bars in Britain after failing to meet bail terms of a 5 million pound($7.8 million) surety because his assets had been frozen.

He was finally released in August after U.S. authorities agreed he could be released with the terms lowered to 50,000 pounds.

On Friday, a judge at London's Westminster Magistrates' Court will hear arguments in his defence as to why he should not be extradited, with the focus not on the facts of the case but on whether the U.S. charges would also be offences under English law, and if so whether he should be tried in Britain.

Sarao's lawyers are also likely to raise health issues, having told the Westminster court in August that he had been diagnosed with Asperger's syndrome, a form of autism.

The trader denied any wrongdoing in May, telling the court: "I've not done anything wrong apart from being good at my job."

The court has been told that despite his modest lifestyle, he had funds of more than 30 million pounds, including 25.5 million held in Switzerland and 5 million in an escrow account in the United States.

(Editing by Stephen Addison)