To those who lived through the harrowing market plunge in which it seemed that the Fed has finally lost control, the May 6 2010 flash crash feels like yesterday, and to nobody more so than to the person who mysteriously emerged [4]two weeks ago, just days ahead of the 5 years statue of limitations expired, to blame it all on one person as the CFTC's scapegoat: Navinder Sarao.
And while the rest of the world, or at least 1% of it, is enjoying the ongoing "wealth effect" propping up the increasingly more rickety "markets" built on the backs of $22 trillion in central bank assets, or more than the GDP of the US and Japan combined, earlier today Nav was fighting if not for his life then certainly his freedom when he told a London court he had done nothing wrong, the Flash Crash was not his fault, and was just good at his job.
"I've not done anything wrong apart from being good at my job. How is this allowed to go on, man?" Sarao said at Westminster Magistrates' Court.
How is it allowed to go on? Simple: as we showed two weeks ago, you threatened to expose the "mass manipulation of High Frequency Nerds [5]", and since Virtu was about to report its first public quarter since going public, someone had to deflect attention from the true culrpits of the flash crash.
In other words, you were the scapegoat: a patsy who "traded from his parents' modest home in west London."
Worse, this mastermind behind the biggest, if briefest, wipeout in market value in history, is unable to procure the 5 million pounds he needs to post bail. As Reuters reports [6], Sarao's lawyer James Lewis said Nav had not been able to access the 5 million pounds because U.S. authorities had frozen his assets.
"We cannot obtain any money. Any request to obtain the money was refused," Lewis told the court.
He asked for the bail surety to be lowered to 50,000 pounds on Wednesday but the application was rejected by District Judge Elizabeth Roscoe, and Sarao remains in custody.
"I will not vary bail. I will leave it as it is," Roscoe told Sarao and his legal team, who said they would consider an appeal to London's High Court.
Sarao, dressed in a gray sweatshirt and gray tracksuit bottoms, had sat calmly in the dock until he heard his bail conditions would not be changed, and then spoke out to the court to plead his innocence.
And just so we can all once again relive the flash crash in all its visual glory, here is an animation courtesy of Nanex, showing [7]the E-mini future which Sarao was said to have spoofed so much it caused all bids to disappear for minutes. The punchline: Sarao's orders are shown in red, and they disappear well before the most acute part of the flash crash.
The bottom line is that Sarao was spot on: he merely was doing his job: a job of trading a market that is so broken that it allows the regulators to arbitrarily blame anyone they choose while ignoring the true culprits of the broken market.
