24 April 2015
Why ‘Flash crash’ Whistleblower Could Make Millions
It has been reported that an anonymous whistleblower could get millions in compensation if the information they provided on ‘Flash crash’ trader Navinder Singh Sarao ultimately helps the success of the prosecution.
The tipster helped by providing the information which led to Mr Sarao, being arrested and charged. Mr Sarao has not yet faced trial, and is presently fighting extradition to the US. In an astonishing case, details have emerged that Mr Saraowas living what looked like a modest life to the outside world at his parent’s house in Hounslow, London, despite making £27 million from his trading.
Now if he is subsequently convicted as a result of the whistleblower’s information, and the US regulator gets back a certain amount as a result of the prosecution, the whistleblower could get up to 30% of the total sanctions collected from the case. Potentially millions!
This is because the US Commodity Futures Trading Commission whistleblower system gives pay-outs to encourage tip-offs in the wake of the financial crisis.
Samantha Mangwana, Principal Lawyer in the Employment Team at Slater and Gordon, said:
“Today’s speculation really highlights the differences in the US and UK legal systems, designed to encourage whistleblowing. In some US whistleblowing cases, the whistleblower can recover millions of dollars, like a ‘bounty’ in the old Wild West. While in UK Employment Tribunals, we have a completely different system – whistleblowers can only really receive compensation for the losses they have actually suffered.
Although regulators here have considered whether financial scandals could be prevented if employees were better incentivised to report concerns; the US system has so far not been introduced. This may feel unfair to some UK whistleblowers, particularly if their counterparts across the Atlantic stand to recover huge financial rewards for standing up and doing the right thing.”
Back in 2010 on May 6th a massive $500 billion was wiped off share values on the stock market called the Dow Jones Industrial Average, or the Dow for short. The event is now known as the ‘flash crash’ and Mr Sarao is accused of having helped contribute towards it and to have benefitted from it: Making profits exceeding $545,000 by placing orders 19,000 times before cancelling them.
This is called ‘spoof bidding’ and is one of Mr Sarao’s 22 charges. If convicted, he could get up to 25 years for charges which also include market manipulation, commodities fraud and wire fraud.
The US Department of Justice has requested the extradition of Mr Sarao who refused to go to America and will remain in jail in the UK until his £5 million bail conditions are met. After which, he will have to report to Hounslow police station three times a week, wear a tracking device and comply with a ban from accessing the internet.
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