Navinder Sarao: ‘Flash Crash’ Trader’s Extradition Request Upheld

The Government of the United States of America v Navinder Singh Sarao (23 March 2016)

The case of Nav Sarao, the “hound of Hounslow” who faces a potential sentence of 380 years’ imprisonment on 22 counts in the US, has inflamed emotions and commentators have expressed extreme sympathy with the rogue trader who is considered to be the main culprit behind the “flash crash” of 6 May 2010. The disproportionate nature of his predicament is clearly illustrated by the fact that if extradited and punished in America, Sarao may well receive a harsher sentence than Serbian war criminal Radovan Karadic who got 40 years for crimes against humanity and genocide but will enjoy the right to a lengthy appeals process. It has been argued that Sarao had to be caged because he discovered a way to beat the HFTs at their own game. At the time of his arrest, senior traders even made public statements about footing his legal bill. Seldom has a corporate crime case aroused such a passionate response. Fellow traders dubbed Sarao “our spoofing hero” and the case against him was labelled “ridiculous”. Yet in the Westminster magistrates’ court judge Quentin Purdy disagreed and found that Sarao was extraditable to the US on the charges levelled against him. On the other hand, in making factual findings in the case, judge Purdy found that the downturn in the market was not attributable to a single event and the cause of the flash crash “cannot on any view be laid wholly or mostly at Navinder Sarao’s door” because even though he was active on 6 May 2010 the date “is only a single trading day in over 400 relied upon by the prosecution.”

Against this, the Commodities Trading Futures Commission accuses the Brit of exacerbating the flash crash and claims he “was at least significantly responsible for the order imbalances” in the derivatives market which affected stock markets to make matters worse on the day. The judge found that if found guilty of market abuse under UK law, Sarao’s activity would result in a sentence of 12 months’ imprisonment being imposed on him and so the dual criminality test in section 137 of the Extradition Act 2003 was satisfied. He also stressed the importance of the public interest in upholding the controversial UK-US Extradition Treaty. Sarao is accused of engaging in a ferocious campaign to manipulate the price of the E-mini S&P 500 on the Chicago Mercantile Exchange by relying on a variety of exceptionally large, aggressive and persistent spoofing tactics.

Is the door to England still that wide open for CIS disputes?

Guest Post by AstapovLawyers International Law Group

6 February 2013 has marked lawyers’ calendars with an important message from the UK Supreme Court: English courts will not accept the jurisdiction over a dispute which has its “centre of gravity” in another country. In particular, the Supreme Court found that in a tort claim, where the key issues in the litigation would on the face of it be factual not legal, law governing the tort was of very little, if any, potency for the purposes of defining the appropriate forum. The Supreme Court also refused to invoke non-exclusive jurisdiction clauses in favour of English courts noting that the connection with another country was of such strength and importance that England could not be said to be clearly or distinctly the appropriate forum.

For the reasons explained below, Lord Neuberger PSC and Lord Mance, Lord Clarke, Lord Wilson and Lord Reed JJSC upheld the lower courts’ judgments dismissing the jurisdiction of English courts and claims on piercing the corporate veil in the widely reported case of VTB Capital plc (Appellant) v Nutritek International Corp and others (Respondents) [2013] UKSC 5. (On appeal from [2012] EWCA Civ 808 and [2011] EWHC 3107 (Ch) respectively.) See case preview on this blog here.

VTB v Nutritek: Piercing the Corporate Veil: UK Supreme Court Preview

The truly important and absorbing case of VTB Capital plc (Appellant) v Nutritek International Corp and others (Respondents) UKSC 2012/0167 has made it to the UK’s court of final recourse which granted permission to appeal on 26 July 2012. The case is going to be heard for three days by Lords Neuberger, Mance, Clarke, Wilson and Reed JJSC from 12 to 14 November 2012 . There are a lot of issues in this case. Notably a couple of juicy ones are (1) whether the court can pierce the corporate veil and treat a person as a party to a contract if that person uses a puppet company to enter into a contract with a third party in order to perpetrate fraud on that third party and (2) when determining whether England is clearly the appropriate forum, is there a presumption that a defendant who has committed a wrong in England ought to answer for that wrong in England. For some reason this case is not being broadcast live. Maybe it is just too high profile and controversial to show live. Too bad …  because upon appeal to the UKSC, even Special Immigration Appeals Commission dealing with national cases are aired. 

Facts

VTB (“V”), a London-based bank (the appellant) entered a facility agreement with a Russian company (“R”) in 2007. Under that agreement, V loaned R $225m to fund the purchase of six Russian Dairy Plants (“the dairy companies”) from the first defendant (Nutritek, “D1”: the “defendants” (at first instance) also became the “respondents” in subsequent proceedings). R subsequently defaulted on the loan. In 2010, V began claims in deceit, alternatively conspiracy to defraud, against the defendants. In May 2011, Chief Master Weingarten granted permission to serve the claims on the defendants out of the jurisdiction. In August 2011, V obtained a worldwide freezing order against Konstantin Malofeev or “D4”: see below.