Navinder Singh Sarao extradition: the two big questions

US authorities' attempts to extradite London-based futures trader Navinder Singh Sarao will succeed or fail based on two questions, according to legal experts: whether the market manipulation technique he is accused of using was a criminal offence in the UK at the time; and whether the UK authorities themselves will investigate the issue.

Under the terms of existing treaties, the extradition of British citizens to the US or any other country may be blocked if the alleged offence does not breach UK criminal law, if a UK investigation is live, or if the defendant is deemed to unfit for trial or at risk of torture or cruel treatment in the requesting country.

In the case of Mr Sarao, no probe has been launched by the UK's Serious Fraud Office, Metropolitan Police, City of London Police or Financial Conduct Authority, according to people familiar with the situation.

But while there is no specific criminal offence of "spoofing" in the UK - the manipulation of markets with fake trades, of which Mr Sarao stands accused - the FCA does states that it constitutes market abuse. In 2013, it fined a US national, Michael Coscia $900,000 over similar allegations. Mr Sarao is also charged with wire fraud and commodities fraud, and US prosecutors may be able to argue that both charges fit under the UK offence of fraud, which can be defined widely. It is currently being used to prosecute traders accused of Libor manipulation.

Even if the UK authorities take no action, there is also a precedent for defendants facing extradition to mount legal challenges against the lack of an investigation in their home country.

In 2006, the so-called NatWest Three, who were indicted by the US on Enron-related fraud charges, sought a judicial review to force action by the UK's SFO, without success. More recently, Julien Grout, who has been charged by the US over the JPMorgan "Whale" trading losses, failed in a legal challenge to the FCA for dropping its investigation.

While it might appear counter-intuitive for defendants to force a UK investigation into allegations that they deny, many have preferred to face a jury in their home country, and a more lenient sentencing regime for white-collar crime. Fraud sentences in the UK are rarely more than 10 years. In the US, those convicted of market manipulation and wire fraud face 20 to 30 years in jail.

Chris David, a white-collar defence lawyer at WilmerHale in London, said the initial criminal complaint and extradition request were more likely an opening negotiating position from the US Department of Justice.

"Due to these severe penalties . . . it is rare that a defendant faces trial but rather that they negotiate a plea", he explained.

Since a diplomatic row broke out over the extradition of Gary McKinnon, an British Asperger's syndrome sufferer who hacked Pentagon computers, the UK has introduced a further barrier to extradition where most of the alleged misconduct takes place in the UK.

Mr Sarao's case "may well be an interesting test of the new legislation," Mr David said.

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