Navinder Singh Sarao, the UK day trader guilty of “spoofing” stock index futures, has helped US prosecutors build a case in a broadening crackdown on market abuse. Criminal spoofing charges unsealed on Monday against Jitesh Thakkar, a technology consultant in Illinois, cite information obtained by a “Trader #1”. The unnamed trader was Mr Sarao, a person close to the matter and court filings said. Mr Sarao pleaded guilty in November 2016 to one count of wire fraud and one of spoofing, a tactic of misleading other traders by rapidly entering and cancelling orders. He pledged to co-operate with authorities as part of his plea agreement. The case against Mr Thakkar was announced alongside several other criminal spoofing charges in what the US justice department called its largest futures market criminal enforcement action. He was the only vendor to the futures industry to be charged, not a trader. Mr Sarao has not yet been sentenced. An affidavit filed in the Thakkar case said his co-operation with prosecutors could lead to a reduced sentence. Prosecutors labelled Mr Thakkar a co-conspirator for developing a trading program that enabled Trader #1 to spoof the e-mini S&P 500 futures contract on the Chicago Mercantile Exchange. In a separate civil action, the US Commodity Futures Trading Commission charged Mr Thakkar with “aiding and abetting spoofing and a manipulative and deceptive scheme” with a Trader A in the same futures contract. James McDonald, the CFTC enforcement director, said: “In its effort to root out spoofing from our markets, the CFTC will work vigorously to hold accountable not only the individuals who engage in the spoofing, but also those who produce and sell the tools designed to spoof.” Mr Thakkar was arrested by law enforcement authorities Monday and could not be reached for comment. Mr Sarao’s lawyer did not immediately respond for comment. Mr Thakkar’s company, Edge Financial Technologies of Chicago, builds trading algorithms, high-speed trading platforms and “kill switches” for traders, among other products, according to its website. He served on a CFTC technology advisory committee from 2012 to 2014, the website said before his biographical page disappeared late on Monday. But between October 2011 and April 2015, federal authorities allege that Mr Thakkar was also conspiring with the trader to spoof the e-mini S&P market, according to the criminal complaint. The civil complaint against Mr Thakkar said he began working with Trader A after an October 12, 2011 email communication. The language of the communication is identical to an email from the same date between Mr Thakkar and Mr Sarao, which the CFTC had previously filed in its case against Mr Sarao. The criminal complaint against Mr Thakkar said his co-conspirator was a futures trader who lived in the UK and pleaded guilty to one count of wire fraud and one count of spoofing on November 9, 2016 — all facts that are unique to Mr Sarao. Authorities had blamed Mr Sarao’s aggressive trading for contributing to the 2010 “flash crash,” when US stock indices inexplicably plunged one afternoon. This week’s court filings indicate Mr Thakkar and Mr Sarao began working together more than a year later.
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