Navinder Singh Sarao, the British financial trader accused of making $40m (£27m) by manipulating US stockmarkets and in the process contributing to the 2010 “flash crash”, invested £2m of his profits in a company linked to a former court of appeal judge, a City grandee, a pair of private equity tycoons and a media entrepreneur.
In a discovery that appears at odds with the first portraits of Sarao – who traded on the world’s financial markets in a tracksuit while frugally lunching on discounted sandwiches – the 36-year-old trader appears to be connected to major figures in the City and the British establishment.
The fresh details of how Sarao’s trading profits appear to have filtered into more mainstream parts of the City have emerged after a week in which the previously obscure trader was propelled on to the front pages after he was arrested by British police on Tuesday, and the US Department of Justice (DoJ) started extradition proceedings.
The US authorities allege Sarao, now dubbed the “Hound of Hounslow” in a reference to Martin Scorsese’s 2013 film The Wolf of Wall Street, “spoofed” financial markets from his parent’s semi-detached home in Hounslow using commercially available trading software to place $200m of false trades. The agency added that the supposed market manipulation contributed to the flash crash on 6 May 2010, when the Dow Jones index plunged 600 points in five minutes and created havoc in the world’s financial markets.
The Guardian has established that Sarao invested £2m in a start-up company called Iconic Worldwide Gaming, which was formed in 2013, and that he remains a minority shareholder in the business.
Iconic was holds patents for peer to peer gambling. The patents are licensed for use by Malta registered iconicbet.com, an online casino whose operating company is advised by a string of well known names.
They include Sir Robin Jacob, a former court of appeal judge; Sir David Michels, a former chief executive of Hilton hotels and erstwhile deputy chairman of Marks & Spencer; and Damien O’Brien, the Irish telecoms entrepreneur behind Sky talent show Football’s Next Star, who describes himself as the chief executive of the company Iconic Corporation. Their names and roles were detailed on the website theiconiccorp.com until the Guardian contacted the individuals involved on Friday, at which point information listing the directors was removed.
Also listed as senior figures at Iconic Corporation are City financiers Miles Mackinnon and John Dupont, the founders of Mayfair based boutique private equity firm MD Capital Partners, who say they raised the “pre-launch capital” for Iconic Worldwide Gaming and its linked gambling website iconicbet.com.
Michels and O’Brien did not respond to invitations to comment, but Sir Robin Jacob confirmed he was a director of the operating company which controls iconicbet.com, and said his company was “an entirely innocent victim”. Jacob said he had met Michels and other directors on Wednesday following Sarao’s arrest and discussed the extent of the trader’s involvement.
“We had a board meeting on Wednesday after this chap was nabbed. We have never met him and I knew nothing about him. I am a director of the operating company and the business of the operating company is to exploit some patents that were invented and registered by Mr O’Brien.”
The former judge, who is a patents expert, said: “The patents are registered in the UK company [Iconic Worldwide Gaming], of which Mr Sarao is a passive minority shareholder. He hasn’t got any shares in the operating company, he has nothing to do with the operating company. This company is an entirely innocent victim.”
Dupont previously worked at Manx Trust Management Group where he was sales and marketing director of Montpelier Tax Consultants. Mackinnon sits on the executive board of the Special Olympics. He is also a member of the Company of International Bankers and the International Tax Planning Association.
Mackinnon is listed by Companies House as briefly being a director of Sarao’s company, Nav Sarao Futures Ltd, which held shares in Iconic Worldwide Gaming.
In December 2014, Nav Sarao Futures transferred the shares to International Guarantee Corporation, an Anguilla-based company that US authorities say the trader created as part of a “tax avoidance strategy”. At Wednesday’s bail hearing at Westminster magistrates’ court, Sarao’s lawyer said the trader had £4.7m in an IGC trading account that could be used as a surety.
Dupont said: “Whilst we are aware that Nav Sarao Futures Limited acquired shares in Iconic Worldwide Gaming Limited at the end of October 2013, Nav Sarao Futures does not currently have any shareholding in the company. Neither I nor my colleague Mr MacKinnon have ever held board positions at this company.” He did not respond to follow-up questions about Sarao switching his holding to International Guarantee Corporation.
The US DoJ complaint states: “Around the time of the flash crash, Sarao took significant steps to protect his assets. In late April 2010, Sarao established a new entity, Nav Sarao Milking Markets Limited, which was incorporated in Nevis. Sarao appears to have created this company as part of a tax avoidance strategy pursuant to which he also established, in 2012, International Guarantee Corporation, incorporated in Anguilla.”
Dupont added that Jacobs and Michels are advisers to the Iconic Corporation, not Iconic Worldwide Gaming Limited. He said: “The Iconic Corporation to which you refer is not associated in any way with Iconic Worldwide Gaming Limited.”
However, the two companies share the Iconic name and logo, while the the Iconic Corporation website – plus the Iconic Faceoff trademark being advertised there – are both registered to the Sarao-funded IWG. Meanwhile, Dupont, Mackinnon and O’Brien all occupy senior roles at both websites.
Michels is a big name in the betting industry and a keen gambler in his free time. A fixture of the north London poker scene, he ran casinos and hotels group Stakis in the 1990s, and oversaw high street bookmaker Ladbrokes during a seven-year tenure as chief executive of Hilton Hotels, which owned the bookmaker at the time.
The Guardian has also established that, while Sarao operated on the fringes of the financial industry, his contacts extended to the very heart of the City of London. The co-founder of Nav Sarao Futures was his childhood friend Gurmatpal Dosanjh, a financial analyst and debt specialist whose career has included spells at credit-rating giant Moody’s and the blue-chip Bank of America Merrill Lynch.
Dosanjh, who is now working in the middle east as a senior manager for the National Bank of Abu Dhabi, attended Heston community school with Sarao, and both went on to study at Brunel university.
Dosanjh and Sarao became directors of Nav Sarao Futures on the same day, 1 July 2005, and the trader’s friend acted as company secretary for a decade. Records show he remains a director.
Speaking from his home in Hounslow on Thursday, Dosanjh’s father, who lives a short distance away from the Southall family home where Sarao carried out many of his trades, confirmed that Dosanjh had not been arrested, that he was not a trader and he was not aware of his son’s relationship with Sarao.
Asked to comment on events, Dosanjh’s father said: “My son is an adult, I do not know anything about his business affairs.”
