By Nate Raymond

(Reuters) - A London-based trader has been extradited to the United States to face federal charges related to his alleged role in the 2010 Wall Street "flash crash," the U.S. Justice Department said on Tuesday.

Navinder Sarao, 37, who traded on the Chicago Mercantile Exchange (CME) from his parents' home near London's Heathrow Airport, is scheduled to appear in federal court in Chicago on Wednesday morning after losing a legal challenge to his extradition.

Sarao, who denies wrongdoing, arrived in the United States on Monday afternoon, said Peter Carr, a Justice Department spokesman. A lawyer for Sarao did not immediately respond to a request for comment.

Prosecutors say Sarao used a modified computer program to "spoof" markets by generating large sell orders that pushed down prices.

He then canceled the trades and bought the contracts at the lower prices, reaping a roughly $40 million profit, prosecutors say.

They contend his actions contributed to market instability that led to the flash crash on May 6, 2010 when the Dow Jones Industrial Average briefly plunged more than 1,000 points, temporarily wiping out nearly $1 trillion in market value.

In April 2015 he was charged by the United States with wire fraud, commodities fraud, commodity price manipulation and attempted price manipulation and spoofing.

A British judge initially approved his extradition in March. His bid to launch an appeal against the decision was rejected in October, ending his 18-month legal fight.

The case is U.S. v. Sarao, U.S. District Court, Northern District of Illinois, No. 15-cr-00075.

(Reporting by Nate Raymond in New York; Editing by Jeffrey Benkoe)