CHICAGO (WLS) -- The "Flash Crash" was the name given to a stock market free fall on May 6, 2010, when the Dow plunged 1,000 points in minutes.
Now, federal prosecutors in Chicago have charged a futures trader with having a hand in the Flash Crash. Bond was set Wednesday at $7.5 million for the Flash Crash suspect, Navinder Singh Sarao.
Sarao, 37, is charged by federal prosecutors in Chicago with $40 million in fraudulent trades at the Mercantile Exchange, even though he made the trades from his parents' house near London, England, nearly 3,900 miles from the Merc in Chicago.
When trading when haywire at the Merc on that May day five years ago, authorities knew what happened, but they just didn't know who was behind it. In this federal complaint, prosecutors say that Sarao was behind the market manipulation at the Merc.
On Wednesday, the front page of British newspaper The Telegraph showed a photo of the man arrested in the Chicago case and quoting a former classmate who calls him "a prankster who always got away with it."
From his bedroom in his parents' home in west London, Sarao allegedly used an automated trading program to manipulate S&P 500 futures contracts known as e-minis.
When the flash crash was done - the Dow having dropped 600 points in five minutes - Sarao had made $850,000 in a day, and eventually $40 million from the wrongdoing, according to authorities.
FBI agents in Chicago sorted through the intricacies of the Mercantile Exchange computer programs and authorities say a whistleblower helped to tie the manipulation back to Sarao.
On Wednesday, Sarao appeared before a Westminister magistrate in the U.K. who set bail at $7.5 million and ordered him to remain under house arrest. An extradition hearing is scheduled for August and Sarao is going to fight being brought to Chicago to stand trial.
Chicago Mercantile Exchange officials said Wednesday that after the Flash Crash, an analysis of trading on that day in 2010 concluded that the crash was not caused by the Chicago futures market, but that they are unable to discuss any individuals trading behavior.
They said the Merc supports the action to prosecute those who attempt to engage in fraud or manipulation.
Criminal complaint against Navinder Singh Sarao
CME Group statement on Navinder Singh Sarao case
Merc trader charged in connection with 2010 Flash Crash
ABC7 I-Team Investigation
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