Wash Trading in Australia 2025: Risks, Laws & How to Spot It

Wash trading—once a niche concern for regulators and market insiders—has become a hot topic in Australia’s financial circles as digital assets and trading technologies evolve. As ASIC and the ATO update their enforcement strategies for 2025, investors and market participants must understand what wash trading is, why it matters, and how to steer clear of its risks.

What Is Wash Trading?

Wash trading refers to the practice of buying and selling the same financial asset—or substantially similar assets—within a short time frame to create a misleading impression of market activity. The goal is often to inflate trading volumes, manipulate prices, or harvest artificial tax losses.

• Traditional Example: An investor sells shares of a company at a loss, then repurchases the same shares almost immediately to claim a tax deduction while maintaining their investment position.
• Crypto Twist: Automated bots and anonymous accounts have made wash trading rampant on some unregulated crypto exchanges, with fake volume sometimes accounting for over 70% of reported trading activity globally.

In Australia, wash trading is illegal under both market manipulation and tax avoidance laws. ASIC (Australian Securities and Investments Commission) and the ATO (Australian Taxation Office) are actively monitoring for these behaviours across equities, ETFs, and digital assets.

2025 Policy Updates: Tighter Scrutiny and Digital Asset Focus

The surge in retail trading apps and DeFi (decentralised finance) platforms has prompted fresh regulatory moves in 2025:

• ASIC’s Expanded Surveillance: In February 2025, ASIC rolled out AI-driven surveillance tools to detect coordinated trading patterns on both ASX-listed securities and major crypto exchanges operating in Australia.
• ATO’s Crypto Tax Crackdown: The ATO updated its guidance to clarify that wash sales—where taxpayers sell crypto for a loss and quickly repurchase the same asset—are disallowed for capital gains tax (CGT) purposes, mirroring rules already applied to shares.
• Enforcement Action: Several high-profile investigations in 2024 led to fines and trading bans for individuals and firms caught inflating volumes or creating artificial price moves in both equities and digital tokens.

These moves signal a clear intent: whether you’re trading stocks, ETFs, or crypto, wash trading is firmly in the regulators’ crosshairs for 2025.

Red Flags and Real-World Examples

Wash trading can be tricky to spot, especially for everyday investors. Look out for these signs:

• Unusual spikes in trading volume without corresponding news or announcements
• Frequent buy and sell orders at similar prices, often from the same participants
• Rapid in-and-out trades that don’t align with broader market trends

Case Study: In late 2024, an ASX-listed microcap saw its daily volume surge tenfold over a week, drawing media attention. ASIC’s investigation revealed that a group of traders coordinated buy and sell orders to create a false impression of interest, leading to a rapid price spike and subsequent regulatory intervention.

Crypto Example: Several offshore exchanges were blacklisted in early 2025 after ASIC identified wash trading bots inflating token volumes, misleading Australian investors into believing there was strong market demand.

How to Protect Yourself

• Use Reputable Platforms: Stick to regulated exchanges and brokers with transparent reporting and compliance measures.
• Do Your Research: Scrutinise unusual price or volume movements—if something looks too good to be true, it probably is.
• Tax Caution: Don’t attempt ‘tax loss harvesting’ with immediate repurchases—the ATO’s updated rules for 2025 make this a high-risk strategy.
• Report Suspicions: If you spot suspicious activity, consider reporting it to ASIC via their online market integrity form.

The Bottom Line

Wash trading isn’t just a relic of old-school stock scams—it’s alive and well in the digital age, and regulators are stepping up their game in 2025. With ASIC and the ATO deploying smarter tools and stricter rules, Australian investors need to stay vigilant. By understanding how wash trading works and knowing the warning signs, you can avoid getting caught up in market manipulation schemes—protecting both your portfolio and your peace of mind.