Watch CBSN Live

U.S. officials tie trader to 2010 "Flash Crash"

A futures trader was arrested in the U.K. Tuesday on charges he manipulated the market and played a part in the May 2010 "Flash Crash," U.S. authorities said.

Navinder Singh Sarao, 37, is accused of wire and commodities fraud in a criminal complaint filed in federal court in Illinois. The U.S. is seeking Sarao's extradition, the Justice Department said in a statement.

For more than five years and continuing as recently as at least April 6, 2015, Sarao engaged in a massive effort to manipulate the price of the E-mini S&P 500, according to the U.S. Commodity Futures Trading Commission, or CFTC, which filed a separate complaint.

Sarao operated his own trading company and participated in trading strategies known as "spoofing" and "layering," which involve submitting market orders in which there is no intention of filling them.

Sarao and his company, Nav Sarao Futures Limited, has profited more than $40 million from E-mini S&P trading, the CFTC said.

The trader's actions factored into a scenario on May 6, 2010, in which the Dow Jones industrial average fell about 1,000 points in just five minutes before recovering a large portion of the loss.

In a report five months later, the CFTC and the Securities & Exchange Commission blamed one mutual fund's massive trade and automated traders speeding up their buying and selling as causes in the drop that came amid market uncertainty over Europe's debt crisis.

View CBS News In