From a modest stucco house in suburban west London, where jetliners roar overhead on their approach to Heathrow Airport, a small-time trader was about to play a hand in one of the most harrowing moments in Wall Street history.

Navinder Singh Sarao was as anonymous as they come -- little more than a day trader by the standards of the Street.

But on that spring day five years ago, U.S. authorities now say, Sarao helped send the Dow Jones Industrial Average on the wild, 1,000-point ride that the world came to know as the flash crash. By regulators’ account, he was responsible for a stunning one out of five sell orders during the frenzy. On Tuesday, he was arrested by Scotland Yard and charged in the U.S. with 22 criminal counts, including fraud and market manipulation.

The following day, the 36-year-old Briton appeared in London court to contest the extradition bid, a move that could delay the U.S. case for years. Clad in a long-sleeved yellow t-shirt and white sweatpants, he told Judge Quentin Purdy that he wouldn’t consent to the U.S. request.

The news of his arrest left many grasping for answers. Sarao has no record of having worked at a major financial firm in the U.S. or the U.K. At the time of the flash crash, Sarao was renting space from a proprietary-trading firm and clearing his transactions through MF Global Holdings Ltd., the now-defunct firm headed by Jon Corzine, said a person with knowledge of the matter. One of Sarao’s neighbors in Hounslow, 11 miles from central London, said what neighbors so often say: He was quiet, kept to himself, never caused trouble.

That picture, according to U.S. authorities, belies a years-long history of lightning-quick computer trading that netted Sarao $40 million in illicit profits.

Sarao didn’t cause the flash crash single-handedly, authorities say. Nonetheless, Tuesday’s developments fly in the face of the prevailing narratives of what happened. Regulators initially concluded that a mutual fund company -- said to be Waddell & Reed Financial Inc. of Overland Park, Kansas -- played a leading role. Many in the industry countered that a confluence of several forces, including high-frequency trading, was probably behind the crash.

By all accounts, the flash crash was more than a mere technical glitch. It raised fundamental questions about how vulnerable today’s complex financial markets are to the high-speed, computer-driven trading that has come to dominate the marketplace.

Little is known about Sarao and his trades, beyond what was said in London court and contained in a complaint filed by the U.S. Department of Justice. A related civil suit filed by the U.S. Commodity Futures Trading Commission provides a few additional glimpses into his supposed activities. The case stemmed from a whistle-blower who brought “powerful, original analysis” to the CFTC’s attention, said Shayne Stevenson, a Seattle lawyer representing the whistle-blower.

David Fuller's view

I regard this as a destructive case of misplaced genius.  Anyone with Sarao’s abilities could have a very lucrative future with any number of respectable high-tech firms.  Instead, he used his genius to scam the markets.

This was not a victimless crime.  Anyone who was watching the US markets on the day of the flash crash will never forget it.  Moreover, it unnerved a countless number of investors, both in the USA and far beyond, frightening them out of the markets when the current bull market was still in its foothills.   

(See also: Flash Crash Arrest Lays Bare Regulatory Lapses at All Levels)