Securities Regulation Daily Sarao’s autism at the heart of receiving no-jailtime sentence
Wednesday, January 29, 2020

Sarao’s autism at the heart of receiving no-jailtime sentence

By Brad Rosen, J.D.

Judge Virginia Kendall recognized the central role that Navinder Sarao’s Asperger’s syndrome played while considering the factors leading to the imposition of a sentence featuring one year of home confinement.

Judge Virginia Kendall of the Northern District of Illinois imposed a sentence of one-year home confinement in the high-profile criminal case against Navinder Sarao. Sarao has often been blamed for having contributed to the 2010 flash crash, which led to him being charged in a 22-count criminal complaint. Before sentencing Sarao, Judge Kendall stated that she had a good understanding of autism, and indeed that understanding informed her discussion of the sentencing factors set forth in 18 U.S.C. § 3553(a) as applied this case, which the DOJ attorney described as a "unique and extraordinary case" (United States of America v. Sarao, January 28, 2020).

A legal odyssey comes to end. Make no mistake; most observers consider the home confinement sentence to be an outstanding result for the defendant, especially when considering Sarao’s long, strange legal odyssey that began with his arrest in the U.K. in April 2015. The DOJ filed a criminal complaint charging him with one count of wire fraud, 10 counts of commodities fraud, 10 counts of commodities manipulation, and one count of manipulation and spoofing, the practice of bidding or offering with the intent of canceling the bid or offer before trade execution. At that point, Sarao faced a maximum prison term of 380 years.

The DOJ also claimed that Sarao’s market manipulation contributed to a major drop in the U.S. stock market on May 6, 2010, which came to be known as the "flash crash." On that day, the Dow Jones Industrial Average fell by approximately 600 points in a five-minute span, following a drop in the price of the closely related E-Mini S&P futures market, where Sarao traded actively. Over time, Sarao’s responsibility for causing the flash crash has been challenged and largely debunked.

After his arrest, Sarao was detained in the U.K. for approximately four months before being released on conditional bail pending his extradition. He was extradited from the U.K. to the U.S. in November 2016 and, immediately upon his extradition, admitted responsibility for his offenses and began cooperating fully with U.S. authorities.

Sarao’s extraordinary cooperation warranted a significant departure from the advisory guidelines. Judge Kendall noted that the DOJ’s advisory guideline suggests a range of imprisonment from 78 to 97 months. In looking at the section 3553(a) factor, which looks to the character and nature of the offense, the judge acknowledged the defendant’s extraordinary cooperation with the government, his settlement with the CFTC, which required the payment of nearly $39 million dollars in fines, and the role he played in assisting the government in its ill-fated prosecution of software developer Jitesh Thakkar. The judge particularly noted the extensive and substantial assistance Sarao provided to the government and how he illuminated the government’s understanding of spoofing practices that had only been recently criminalized at the time of his arrest. The government benefited substantially from Sarao’s extraordinary ability to recognize trading patterns that were themselves related to his autism. The government’s position on this these points are discussed in detail in its sentencing memorandum. In the final analysis, Judge Kendall deferred to the DOJ’s conclusion that Sarao’s cooperation had been "extraordinarily timely, complete, truthful, and helpful to the government."

An evaluation of Sarao’s personal characteristics support a lenient sentence. Judge Kendall noted that Sarao had no criminal history and, moreover, it was highly unlikely that he would return to any criminal activity. Notably, she pointed out that autism impacts the mens rea, or the ability to appreciate that a particular conduct is wrongful and the ability to form criminal intent. She also took note of the highly unique circumstances resulting from autism, including his heightened sensitivity to light and sound, as well as the unique analytical abilities and talents stemming from this condition. She took note of the severe difficulties he would experience if incarcerated.

The judge also appeared to give credence to the case for leniency made by Roger Burlingame, Sarao’s attorney. Burlingame explained to the judge that "autism is part of who Nav is and why we are standing here today." Some of the main points he made both in court and comprehensive sentencing memorandum are as follows:

  • Sarao repeatedly complained to the authorities at the CME about traders engaged in cheating. His complaints went unheeded and eventually exchange officials would not even take his calls. This drove him crazy. As the conduct continued, Sarao then videotaped himself committing the same activities for hundreds of hours in order to document their cheating (not realizing he was documenting his own wrongful conduct as well).
  • According to the psychologist Professor Baron Cohen, who evaluated the Sarao, a person with Sarao’s autistic condition cannot distinguish between written rules and effective rules, those rules perceived to be at play. Accordingly, Sarao did not truly understand that spoofing was illegal as many others were engaged in it and the behavior was tolerated by exchange officials.
  • Sarao has an utter lack of concern for money and greed played no role in motivating his behavior in connection with his illegal trading.
  • Sarao is a 41-year-old man who spends his days and nights in the same small bedroom he has lived in since he was a boy, with stuffed animals on his bed, computer games in his bookshelf, and blankets hung over the windows to try to escape the light to which he is exquisitely sensitive.
  • Sarao is public benefits recipient, living on $336 a month for the last four years, whose lifestyle is identical the many prior years when his net worth exceeded $70 million.
  • Sarao is so sensitive to light, sound, and social stimulus that his prior incarceration was a literal torture.

In her closing comments, Judge Kendall observed that it is a rare occurrence in the federal courthouse to have the U.S. government make a time-served recommendation for sentencing, but noted that the DOJ has the best insight to do so. In direct remarks to Sarao she said, "I hope this has been an enormous lesson for you." She indicated that Sarao had made some bad judgment calls on the back end, but some very good calls on the front end by cooperating with the government.

The case is No. 15 CR 75.

Attorneys: Michael Thomas O’Neill, U.S. Department of Justice, for the United States. Roger A. Burlingame (Dechert LLP) for Navinder Singh Sarao.

MainStory: TopStory CFTCNews CommodityFutures Enforcement ExchangesMarketRegulation FraudManipulation InternationalNews

Back to Top

Interested in submitting an article?

Submit your information to us today!

Learn More

Securities Regulation Law Daily: Breaking legal news at your fingertips

Sign up today for your free trial to this daily reporting service created by attorneys, for attorneys. Stay up to date on securities regulation legal matters with same-day coverage of breaking news, court decisions, legislation, and regulatory activity with easy access through email or mobile app.