He created artificial demand in the market and lost Wall Street a billion dollars without leaving his room: the story of the Hound of Hounslow

One day in 2010, the stock market Wall Street suffered a short but intense financial crisis. In less than an hour, a billion dollars had been lost and the person responsible was 6,000 kilometers away. from where the event occurred.

Navinder Sarao He is now 46 years old, but at 32 he achieved something that seemed impossible: a collapse in the most important stock market in the world. And not only that, but He did it from a room in his parents’ house.

Now, Sarao is a self taught stock traderand became an expert on the subject. After that episode in 2010, the Briton was nicknamed the “Hounslow Hound”in reference to the famous scammer from the movie “Wolf of Wall Street.”

How Navinder Sarao Tricked Wall Street From His Bedroom

What Sarao did was a flash crashthat is, a sudden and drastic drop in the price of a security. This can happen when there is news that makes people panic, causing a lot of selling.

The technique was not simple. Sarao artificially manipulated the stock marketthrough the use of a software specially adapted to operate remotely on the Chicago Mercantile Index. In that stock index, every time a buy or sell order was placed, so-called “high-frequency traders” attempted to make their own trades milliseconds before those orders could be executed.

However, as these computers were running an algorithm, Sarao realized that he was using similar software, so decided to move all operations in one direction. In this way, he placed thousands of orders before canceling them, which caused a artificial demand for others to sell or buy that asset.

As a result, he was able to place true buy or sell orders, making profits as the price rose or fell rapidly. Thanks to this technique known as “spoofing” -an illegal activity in the United States-, Sarao managed to keep the money from these assets and left high frequency traders with nothing.

How much money did Navinder Sarao make by cheating the market?

Although Wall Street lost a billion dollars, Sarao got 40 million dollars in a period of five years. Still, in 2016 he agreed to pay the U.S. government $12.8 million, the amount prosecutors said he earned from his illegal operations.

What was the sentence that Navinder Sarao received?

In 2015, Sarao was arrested for his involvement in a “sudden collapse.” He then spent four months in Wandsworth prison before being extradited to the United States. In 2020 Sarao He received his sentence: only one year of house arrest. The Briton pleaded guilty to one count of electronic fraud and one count of “spoofing”.

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And while it may surprise many who initially faced 22 chargeswhich meant a sentence of 380 yearsSarao has the Asperger’s syndrome. This autism spectrum disorder was the condition that saved him from spending the rest of his life behind bars, since according to his lawyers made him see his operation on Wall Street as a way to “win a video game”.