British authorities arrested a stock trader Tuesday for allegedly manipulating the U.S. stock market and causing a major index to plummet 600 points in just five minutes in 2010.
The U.S. Justice Department has charged Navinder Singh Sarao of London with fraud and commodities manipulation and has asked Britain to extradite him.
Sarao is accused of using an automated stock trading program to do something the Justice Department called "dynamic layering." It involved placing many large-volume sell orders at different price points to create the appearance of a large supply. When this tactic caused prices to fall, Sarao is accused of selling futures contracts and buying them back at the lower price.
Sarao's alleged manipulation caused the Dow Jones industrial average in New York to plunge about 600 points in just minutes on May 6, 2010, before bouncing back. Such a quick, sharp drop could have caused a global financial panic.
U.S. investigators initially blamed the crash on computerized trading. They're now saying, for the first time, that the drop was caused by someone manipulating the market.