Trader arrested in 'Flash Crash' that sent markets diving contests extradition

A British trader accused by U.S. authorities of an illegal role in the May 2010 Wall Street "flash crash" was granted bail by a London court on Wednesday after saying he opposed being extradited to the United States to face trial.

The flash crash saw the Dow Jones Industrial Average plunge more than 1,000 points in a day, briefly wiping out nearly $1 trillion US in market value before partially recovering later.

The U.S. Justice Department said on Tuesday it had criminally charged Navinder Singh Sarao, 36, with wire fraud, commodities fraud and market manipulation.

The case marks the first time U.S. regulators have alleged that illegal activities played a role in the crash.

Making his first appearance at Westminster Magistrates' Court, Sarao was granted bail under stringent conditions. He is required to post 5 million pounds ($7.5 million US) himself while his closest relatives must produce a further 50,000 pounds.

In addition, Sarao will have to wear an electronic tag, comply with a night-time curfew at his home in Hounslow, west London, carry a mobile phone at all times to answer calls from police and report to Hounslow police station three times a week.

Sarao will have no access to the internet for any purpose. His passport and those of both his parents will be taken away and kept by police, and Sarao is not allowed to leave England or Wales for any purpose.

"I suspect the last 24 hours have been somewhat dramatic for you," District Judge Quentin Purdy told Sarao at the end of the hearing. "But you now know the U.S. seeks your extradition on very serious charges."

Sarao was warned he would face a fine or prison if he breached his bail conditions.

His lawyer declined to answer questions from reporters about his response to the U.S. allegations.

The next court hearing in the case is scheduled for May 26, with a full extradition hearing to follow on Aug. 18 and 19.

The court heard that Sarao had 100,000 pounds in various betting accounts and another 5 million in a personal trading account of which 4.7 million pounds was a loan.

U.S. authorities accuse him of personally profiting from his alleged wrongdoing by $40 million US, or 26 million pounds.

Sarao was arrested at the home he shares with his parents, a modest suburban house under the flight path of nearby Heathrow airport.

U.S. authorities accuse Sarao of using an automated program to "spoof" markets by generating large sell orders that pushed down prices. He then cancelled those trades and bought the contracts at the lower prices to benefit when the market recovered, U.S. authorities said.

Watkins told the court Sarao had worked as a trader from his home operating primarily through a company he set up trading futures using commercially available software. This allowed traders to communicate with markets and place multiple orders almost simultaneously.

"On numerous occasions ... Mr Sarao is alleged to have spoofed the market," he said.

Watkins also said that Sarao had been asked to stop by U.S. authorities but continued to do so, knowing it was wrong.