Sarao then spent four months in Wandsworth prison before being extradited to the US. We want to hear from you. In an extract from his forthcoming book, Flash Crash, Liam Vaughan recounts how the man dubbed the Hound of Hounslow made his first million pounds after crossing paths with another notorious financial figure. Sarao used a technique called spoofing, and he didn't use any of his money when doing so. Read about our approach to external linking. It also claimed that he used the layering technique continuously from 11:17 am to 1:40 p.m. on May 6, 2010, as well as using the spoofing technique between 12:33 p.m. and 1:45 p.m. He was working there during the 2008 financial crisis. Polite, Jr. Despite the nickname, his life could not have been more different from that of the flashy "Wolf of Wall Street" trader played by Leonardo DiCaprio in the 2013 film. Overview of SARAO's Manipulative Activity 14. Premium Digital includes access to our premier business column, Lex, as well as 15 curated newsletters covering key business themes with original, in-depth reporting. Then, like some horrific Wall Street version of Groundhog Day, he awoke each morning to find gravity had kicked in and the market had sunk back in line with the rest of the world. Then, when the country's stock market closed and volumes thinned out, DAX futures, which keep trading until 10 p.m., began edging higher, like a salmon swimming against the stream. Change the plan you will roll onto at any time during your trial by visiting the Settings & Account section. Times Internet Limited. Both of them would sell a few DAX contracts and see what happened. Sentiment had swung firmly from exuberance to panic, and there was easy money to be made. Sarao was accused by the US government of manipulating markets by posting then canceling huge. As he put everything on the line, the strength of his conviction never faltered, and by the middle of January his balance had ballooned to more than a million pounds. United States v. Navinder Singh SaraoCourt Docket No. That way, they could be the first to make money from market changes. Data is a real-time snapshot *Data is delayed at least 15 minutes. Authorities also said that Sarao created a company in the Caribbean island of Nevis called Nav Sarao Milking Markets. By day three, the traders around them had started to take notice. If you elect to obtain counsel to represent your interests, please have your attorney notify this office in writing at: U.S. Department of Justice, Criminal Division, Fraud Section, 10th & Constitution Avenue, NW, Bond Building, 4th Floor, Washington, DC 20530, Attention: Victim Witness Unit; fax: (202) 514-3708; or email:victimassistance.fraud@usdoj.gov. The CFTC said he also used a spoofing technique that placed 188-lot, and 289-lot orders on the sell side of the market and cancelled them before the orders could be executed. Sarao traded mainly the e-mini S\u0026P futures which are derivatives contracts based on the S\u0026P 500 index of US shares. Over the next several hours, Kerviel confirmed their fears. These cases expose the sometimes blurred distinction between legal and illegal market manipulation. A .gov website belongs to an official government organization in the United States. He was arrested in 2015 for . The CFTC said its investigation revealed that he had profited substantially through this manipulation, which took place on the CME Group's Globex electronic trading system. Sign up for a weekly brief collating many news items into one untangled thought delivered straight to your mailbox. Coscia was sentenced to three years in prison for spoofing futures markets using a specially designed computer program, making an estimated $1.6m (1.2m). The Court has scheduled a hearing for May 1, 2015, on the CFTCs motion for a preliminary injunction. The fabrication of sudden market activity created a momentum in price that Sarao was able to profit from. He bought and sold contracts that effectively speculated on the value of the top US companies. Standard Digital includes access to a wealth of global news, analysis and expert opinion. Time and again it did, and by the second week of January, Nav had gone from shorting a handful of contracts to betting two hundred lots a night, a $15 million position that yielded six-figure profits. He bought and sold contracts that effectively speculated on the value of the top US companies. In 2007 alone, he said, he'd made a profit of around $2 billion by correctly predicting the impact of the impending financial crisis. Navinder Singh Sarao was arrested in 2015, accused of helping cause a $1 trillion market crash. Sign up for free newsletters and get more CNBC delivered to your inbox. Highly intelligent, Sarao has the autism spectrum disorder Asperger's syndrome, and saw beating the markets "like winning a video game," his defence team said. Who to fire? It wasn't clear who was behind the phenomenon or why. The Government may not recommend any specific counsel, nor can the Government (or the Court) pay for counsel to represent you. If you have any questions,please call the Victim Assistance Line toll-freeat(888) 549-3945 or emailus atVictimAssistance.fraud@usdoj.gov. Generally speaking, it was frowned upon at Futex to leave a position open overnight because you couldn't react quickly if the market moved against you. Can Nigeria's election result be overturned? A Division of NBCUniversal. Former stock market trader Navinder Sarao has been sentenced to a year of home detention for helping trigger a brief $1tn (770bn) stock market crash. "It's the Chinese, I know it," suggested one trader when Nav asked him what he made of the mysterious buying. Sarao started his trading career at a rough-and-ready prop shop above a supermarket. A preternaturally gifted trader with a penchant for computer games, Sarao was accused by the US government of manipulating markets by posting then canceling huge volumes of orders to trick other participants about supply and demand a brand new offence known as 'spoofing.' That made the market twitchy - like a flock of sheep, all moving in the same direction. Navinder Singh Sarao is a London-based trader who was arrested on April 21, 2015 on charges his firm, Nav Sarao Futures Limited PLC, contributed to the May 2010 "Flash Crash" in which the Dow Jones Industrial Average fell 600 points in five minutes. If youd like to retain your premium access and save 20%, you can opt to pay annually at the end of the trial. and other data for a number of reasons, such as keeping FT Sites reliable and secure, [12], After leaving Brunel University, Sarao started his career with a back office job at a bank and then joined a graduate trainee program at Futex, a proprietary trading shop in Woking, Surrey. The E-mini S&P 500 is considered among the most widely traded financial products in the world. (202) 514-2000, Crime Victims Rights: How to File a Complaint. He was arrested in 2015. What should a secular society really look like? It wasn't the Chinese after all. Later, Kerviel was sentenced to three years in jail and ordered to pay back the entire $7.2 billion he lost, the biggest fine ever levied on an individual. The CFTC alleged that on May 6, 2010, the day of the so-called Flash Crash, Sarao was active in the E-Mini S&P market on the CME Group. Now 42, Navinder Sarao is a self-taught stock market trader who helped cause panic in US markets in 2010 from a bedroom in his parents' home in Hounslow, West London. You are placing sell side orders aggressively; people will look at this overhang of supply and will convince people to close their trades as they'll think there are many people wanting to exit. Then, like some horrific Wall Street version of Groundhog Day, he awoke each morning to find gravity had kicked in and the market had sunk back in line with the rest of the world. In making its recommendation, the government said Sarao wasnt motivated by money or greed, and that his autism diagnosis should be taken into account.[10]. The turmoil may have been disastrous for the wider economy, but it was a boon for traders like Nav who thrived on the action. UKspreadbetting 368K subscribers Subscribe 855 Share 67K views 4 years ago How. Now 42, Navinder Sarao is a self-taught stock market trader who helped cause panic in US markets in 2010 from a bedroom in his parents' home in Hounslow, West London. Unusually, he was allowed to return to the UK before sentencing, where he has been helping authorities catch other market fraudsters. Read about our approach to external linking. Navinder Singh Sarao had already been found guilty of contributing to the 2010 "flash crash.". Moreover, fleeting orders do . In the email, Sarao looked to the ISV for help modifying a trading function called "cancel if close", which cancels an order if the markets gets close to his price. ", Court documents showed that Sarao did business with MF Global, Marex, Knight Futures and R.J. O'Brien. Late one afternoon in early January, Nav was at his desk when he noticed something odd in the DAX, an index that tracks Germany's thirty biggest companies. HOW I BOOKED 8450 PROFIT IN BANKNIFTY IN 1 LOT#dailyvlog #banknifty #optionstrading #stockmarkets #priceactiontrading !! He admitted that he frequently was able to generate significant trading profits from buying and selling his genuine orders close in time with the placement of the spoof orders. In some ways it didn't really matter. What's the least amount of exercise we can get away with? The story might have ended there, except Kerviel had recently embarked on his most ambitious foray yet. From nothing, he built a bankroll of millions of dollars, buying and selling S&P 500 futures while wearing a tracksuit and a pair of red, heavy-duty ear defenders to block out sound. More recently, UBS, Deutsche Bank and HSBC paid a collective $46.6m (35.9m) to US regulators to settle spoofing claims. During the flash crash Sarao traded 62, 077 lots wtih a notional value of $3.5 billion and he made 879k in profit. The CFTC alleged that Sarao's scheme produced an estimated $40 million in profits for Sarao and his company from 2010 to 2014. Reading about events at Socit Gnrale, the traders at Futex quickly worked out that Kerviel had been the one behind the DAX's strange maneuverings. Check if your The CFTC Complaint charges the . He initially faced 22 charges, which carry a maximum sentence of 380 years. Photo: WILL OLIVER/EUROPEAN . Algorithmic Trading and HFT Strategies How Flash Crash Trader Navinder Singh Sarao Made 90,000-a-Day! Sarao was extradited to the United States on November 7, 2016. Sarao realised that the high frequency traders all used similar software. More recently, UBS, Deutsche Bank and HSBC paid a collective $46.6m (35.9m) to US regulators to settle spoofing claims. As noted above, the U.S. Department of Justice filed a related criminal action charging Sarao with manipulation, attempted manipulation, spoofing, and wire fraud on February 11, 2015, in the U.S. District Court for the Northern District of Illinois. [20] Using specially programmed, high-speed. All Rights Reserved. Read the John Lothian Newsletter. "It's the Chinese, I know it," suggested one trader when Nav asked him what he made of the mysterious buying. [5], He spent four months in a London jail. This practice - known as "spoofing" - allowed him to make genuine buy or sell orders at a profit as the price swiftly rose or fell. In an e-mail sent to the FCA in 2007 Sarao stated that on a volatile day he would make about $133,000. Over the next few hours, DAX futures continued to tumble in line with markets around the world, but by late afternoon the wall of bids had reappeared and prices started to edge up again. Kerviel's wave of after-hours buying only ever propped DAX futures up for a few hours each night. Let's examine how Sarao actually made money from spoofing the S\u0026P 500 futures.Navinder Singh Sarao: Reclusive Trader or Criminal Mastermind?Here are the FACTs.Following graduation from Brunel University in 2003 with a computer science degree, Sarao joined the trainee trader programme at Futex, a relatively small trading house. There still hadn't been anything in the press that might explain the move, but the pattern was clear. He quickly built a reputation amongst his pals of being a brilliant but reclusive trader. 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The arrest of Navinder Singh Sarao, the U.K. trader whose actions authorities allege contributed to the 2010 "flash crash," has shined a spotlight on the businesses known as trading arcades. What is Spoofing? According to the Complaint, Defendants utilized the Layering Algorithm continuously, for over two hours, immediately prior to the precipitous drop in the E-mini S&P price, applying close to $200 million worth of persistent downward pressure on the E-mini S&P price. He agreed to forfeit $12.9 million in ill-earned gains from his trades. Presumption of Innocence: It is important to keep in mind that an indictment contains allegations only, and that defendants are presumed innocent until proven guilty and that presumption requires both the court and our office to take certain steps to ensure that justice is served. roy lee ferrell righteous brothers Likes. programmed, automated trading software. Copyright 2023. There are four prosecuting and three defending attorneys. He was spoofing like this a year earlier but then he was placing the orders manually and as the market got close he would manually pull them away. He made no ostentatious purchases and ended up losing a great deal of his money to fraudulent investors. Nav had struck gold. Navinder Singh Sarao is a British trade rwho was charged for his role in the 2010 U.S. flash crash. A colleague recounted how Nav would trade 1,000 to 1,500 contracts at a time. Of A I Trading Machines And T what you once to read! Simply log into Settings & Account and select "Cancel" on the right-hand side. Despite facing as much as eight years in prison, on Tuesday the Federal Judge Virginia Kendall sentenced Sarao who suffers from severe Asperger's to just one year of supervised release. The BBC is not responsible for the content of external sites. Somebody out there appeared to have an insatiable appetite for DAX futures in the face of strong signals that prices should be going down. This created downward pressure on prices in the market, especially given the sizes of orders he was placing. ". Bakhmut attacks still being repelled, says Ukraine, Saving Private Ryan actor Tom Sizemore dies at 61, Alex Murdaugh jailed for life for double murder, The children left behind in Cuba's mass exodus, Xi Jinping's power grab - and why it matters, Snow, Fire and Lights: Photos of the Week. It is a serious allegation and everyone is taking it seriously. In 2016, Sarao agreed to pay the US government $12.8m (9.9m), the amount prosecutors said he earned from his illegal trading. This page was last edited on 15 January 2020, at 19:20. CFTC Division of Enforcement staff members responsible for this matter are Jeff Le Riche, Jo Mettenburg, Jenny Chapin, Jessica Harris, Allison Sizemore, Carlin Metzger, Elizabeth Padgett, Mary Lutz, Jeri Cobb, Jordon Grimm, Rick Glaser, and Charles Marvine. Between January 2 and January 18, the trader had accumulated a long position of $70 billion, double the market capitalization of the entire bank. The Complaint further alleges that Defendants engaged in a variety of other manual spoofing techniques whereby Defendants allegedly would place and quickly cancel large orders with no intention of the orders resulting in transactions. The "flash-crash trader" used specially adapted software to remotely trade on the Chicago Mercantile Index. Times Syndication Service. In an abbreviated third trial day, the U.S. Department of Justice rested its case against Jitesh Thakkar and Edge Financial Technologies. Despite the nickname, his life could not have been more different from that of the flashy "Wolf of Wall Street" trader played by Leonardo DiCaprio in the 2013 film. He stands accused of making more than $40 by fooling (spoofing) market and contributing to the 2010 Flash Crash. just witnessed? [7], In November of 2016 Sarao was extradited to the U.S. and pleaded guilty in a Chicago federal court to spoofing and wire fraud.
Starting in 2005, he confessed, he'd been secretly placing unauthorized trades worth hundreds of billions of dollars. They also took into account his autism, time in jail already served, and that he has been helpful to the government for several years since then. The CME actually sent him a warning letter but he shrugged it off.Related Video:British 'Flash Crash' Trader: Navinder Singh Sarao - How 'Spoofing' Traders Trick Marketshttps://www.youtube.com/watch?v=LQO3EB7Cdjc This technique and others gave market participants a false sense of volume and liquidity in the market, and artificially move the E-mini market, the complaint said. Layering won global attention in April when U.S. prosecutors alleged Navinder Singh Sarao, a Briton trading from his parent's home, used the technique to help trigger the May 2010 Wall Street . If you elect not to retain counsel to represent your interests, you do not need to do anything. Somebody out there appeared to have an insatiable appetite for DAX futures in the face of strong signals that prices should be going down. It wasn't the Chinese after all. Potentially fairly common. If the market took a tumble, as it had the previous night, they would buy back the same number of contracts the next morning, closing out their position for a profit. Sai Service Centre is one of the best repair and service providers in and around Trichy, as far as Washing Machines, Refrigerators and Air conditioners are concerned. Thakkar is on trial for allegedly facilitating the criminally fraudulent spoofing trading of Navinder Sarao, who pleaded guilty to two criminal counts related to his spoofing of E-mini S&P futures in the first half of this decade. Whoever was buying up the DAX had significant firepower. This button displays the currently selected search type. Navinder Singh Sarao was arrested in 2015, accused of helping cause a $1 trillion market crash. But prosecutors ultimately decided not to push for a jail sentence, as Sarao didn't spend the money on any luxuries and had quickly lost his windfall to fraudsters. What's more, algorithmic trading in itself isn't illegal: it's increasingly common practice in markets when you want to make a large volume of bets, because it allows you to move faster than a human trader ever could. Sarao placed his allegedly improper trades on an exchange owned by Chicago-based CME Group Inc. His product of choice: futures contracts on the Standard & Poor's 500 Index, the benchmark gauge of. The algorithm he used was simply connected to the stocks/futures market via his computer network.. SIMPLY PUT - where we join the dots to inform and inspire you. In particular, according to the Complaint, in or about June 2009, Defendants modified a commonly used off-the-shelf trading platform to automatically simultaneously layer four to six exceptionally large sell orders into the visible E-mini S&P central limit order book (the Layering Algorithm), with each sell order one price level from the other. That made the market twitchy - like a flock of sheep, all moving in the same direction. Can Nigeria's election result be overturned? Read about Navinder Singh Sarao and also why you will never beat the trading algorithms of wall street: telegraph.co.uk/finance/newsbysector/banksandfinance/10736960/ ' - phdstudent Apr 1, 2016 at 12:00 3 I think your general impression is correct: much that is published or marketed on this subject is trash. Sarao, a cooperating witness, is awaiting sentencing for convictions on two criminal charges in a separate case, which could include up to 30 years jail time. Lawyers argued that Sarao viewed markets as a "sophisticated video game. NAVINDER SINGH SARAO MAGISTRATE JUDGE tl/IARTN CASE NUMBER: UNDER SEAL 15Cll 75 . The following morning he saw that the index had opened 90 points lower, a substantial drop. He believed his actions were justified because the markets were rigged in favor of highly-profitable, computerized entities known as high-frequency traders, or HFT. He initially faced 22 charges, which carry a maximum sentence of 380 years. personalising content and ads, providing social media features and to It was surreal. Unusually, he was allowed to return to the UK before sentencing, where he has been helping authorities catch other market fraudsters. Despite the swirling negativity, there was a glut of buy orders waiting in the order book; and whenever the bids were hit, they quickly replenished. His software took advantage of this by placing thousands of orders before quickly cancelling or changing them, once he had created artificial demand for other traders to buy or sell that asset. 2023 CNBC LLC. The important thing was that there was a trend that could potentially be exploited. Once again, the market rallied before collapsing overnight, this time by 80 points. For two weeks, he repeated the overnight trade, placing steadily larger positions before heading home to bed and praying his good fortune would hold. Posted at 16:45h in amara telgemeier now by woodlands country club maine membership cost. Sarao's fortune was partly made by artificially manipulating the stock market to make money. The following morning the DAX opened 65 points lower, earning them more than $10,000 apiece. Thakkar, the defendant, took notes and looked on. During the regular trading day for stocks, from 9:00 a.m. to 5:30 p.m. Central European Time, German futures followed the global downward trend. He was arrested in 2015 for his part in the "flash crash"- in which financial markets briefly plummeted in value. Xi Jinping's power grab - and why it matters, Bakhmut attacks still being repelled, says Ukraine, Saving Private Ryan actor Tom Sizemore dies at 61, The children left behind in Cuba's mass exodus, Snow, Fire and Lights: Photos of the Week. : 1:15-cr-00075 (N.D. Illinois). The CFTC said that Sarao made $879,018 in net profits in the E-minis that day and made more than $40 million between 2010 and 2014. Residing as they did on the fringes of the financial firmament, traders at Futex, the arcade where Nav cut his teeth, were inclined to indulge in conspiracy theories about sinister forces controlling the markets. He had been layering in sell-side spoof orders throughout the period but, according to the DOJ, his activity intensified on the morning of May 6. In 2015, the U.S. Department of Justice filed charges against a London-based trader, Navinder Singh Sarao. His attorneys argued that money was never his motivation but he had an ongoing fascination with markets as a "sophisticated video game.". (The complaint said its research showed the average market size order was just 7 lots.). [13]. By clicking Sign up, you agree to receive marketing emails from Insider The theory behind spoofing is this. Any changes made can be done at any time and will become effective at the end of the trial period, allowing you to retain full access for 4 weeks, even if you downgrade or cancel. The following morning he saw that the index had opened 90 points lower, a substantial drop. Court Assigned:This case is assigned to the Honorable Virginia M. Kendall, U.S. District Court for the Northern District of Illinois, Everett McKinley Dirksen United States Courthouse, 219 South Dearborn Street, Chicago, IL 60604. US v. Jitesh Thakkar: An Exercise in Justice. Waiting for him in a conference room inside were the head of the bank's investment banking division and various other executives who had spent the past twenty-four hours frantically scouring Kerviel's trading records after uncovering evidence of what they suspected to be a massive fraud. The US Department of Justice (DoJ) and the US Commodity Futures Trading Commission (CFTC) have simultaenously charged Navinder Singh Sarao with manipulating the financial markets, alleging he made . Sarao pleaded guilty to one count of electronic fraud, and one count of "spoofing" - which is illegal in the US. What is Spoofing? Dennis Holden202-418-5088, Check Registration & Disciplinary History, Complaint: Nav Sarao Futures Limited PLC & Navinder Singh Sarao, SRO Order: Nav Sarao Futures Limited PLC & Navinder Singh Sarao. Most countries, including the UK, do not specifically list spoofing as a crime. organisation A genius kid, born on the wrong side of the tracks, rebelling against the establishment. Over the next few hours, DAX futures continued to tumble in line with markets around the world, but by late afternoon the wall of bids had reappeared and prices started to edge up again. Sarao, who spent four months in the U.K.'s Wandsworth Prison before his extradition to the United States, has forfeited about $7.6 million in gains made from trading. The CFTC backed up this claim with email evidence from June 12, 2009 that allegedly indicated that Sarao had asked his FCM for help in contacting the independent software vendor he used to trade futures. In thousands of instances, Sarao admitted, he was able to induce other market participants into buying or selling E-minis by placing the spoof orders, which had the additional purpose and effect of artificially depressing or artificially inflating the price of E-minis. most effective short-termtrading strategies, as well as the author's winning technicalindicators Short-term trading offers tremendous upside. UK authorities charged him with wire fraud, manipulation and commodities fraud, using illegal trading strategies such as spoofing. Navinder Singh Sarao, the British financial trader accused of making $40m (27m) by manipulating US stockmarkets and in the process contributing to the 2010 "flash crash", invested 2m of his. After all, a traders' job is to exploit mispricing in the markets - that's how they make money, although it's supposed to be because they are taking a view on the economy or on an individual stock. But who is he - and how did he help cause markets to plunge almost 4,000 miles away? Kenneth A. His desperate buying spree placed him among history's most notorious rogue traders, a name uttered alongside the likes of Nick Leeson of Barings Bank and Kweku Adoboli at UBS. analyse how our Sites are used. The Standard & Poors 500 Index is an index of 500 stocks designed to be a leading indicator of U.S. equities. A $12.8 million order of forfeiture was incorporated as part of the judgment. The high-frequency futures trader found guilty of contributing to the stock market "flash crash" of May 2010 has been sentenced in a Chicago court to one year of home detention. Time and again it did, and by the second week of January, Nav had gone from shorting a handful of contracts to betting two hundred lots a night, a $15 million position that yielded six-figure profits. He called himself an "old school point and click prop trader. So this would create an artificial depression on price. The global financial crisis was gathering pace and markets lurched around on news of the precarious state of the economy and the measures governments and central banks were taking to shore up the system. Sarao is accused of inputting orders which he never intended to execute.Related VideoHow Flash Crash Trader Navinder Singh Sarao Made 90,000-a-Day!https://www.youtube.com/watch?v=jmg2uZ-8XOY Navinder had a gift for numbers and possessed a photographic memory. According to the plea agreement, in instances when a market reaction occurred, Sarao frequently executed real, genuine orders to buy (typically at artificially low prices) or sell (typically at artificially high prices) E-minis. Defendants then allegedly traded in a manner designed to profit from this temporary artificial volatility. In May 2014, a CFTC (Commodity Futures Trading Commission) report concluded that Sarao did not cause the crash but helped contribute by "demanding immediacy ahead of other market participants.". Global Business and Financial News, Stock Quotes, and Market Data and Analysis. Navinder Singh Sarao made $70 million buying and selling futures from his suburban London bedroom before the FBI showed up to arrest him for helping cause a $1 trillion market crash. The BBC is not responsible for the content of external sites. He was arrested in 2015 for his part in the "flash crash"- in which financial markets briefly plummeted in value. As alleged in the Complaint, Defendants were exceptionally active in the E-mini S&P on May 6, 2010, commonly known as the Flash Crash Day. We visit more than 100 websites daily for financial news (Would YOU do that?). We use Later, Kerviel was sentenced to three years in jail and ordered to pay back the entire $7.2 billion he lost, the biggest fine ever levied on an individual.