Wash trading is the term for trading through multiple accounts, where an individual generates offsetting profits and losses and transfers of positions through accounts that do not appear to be commonly controlled. Wash trading is a form of market manipulationthat creates artificial trading activity and volume, and may be used to evade taxes, inflate prices, or launder money. Wash trading can also involve the use of third parties or intermediaries to conceal the true identity and source of funds of the trader.

= The main references for this question are the following sources:

The document titled “Money Laundering and Terrorist Financing Typologies and Trends in Canadian Securities Dealers” published by the Investment Industry Regulatory Organization of Canada (IIROC) in December 2019. You can access it by clicking here. This document states that “Wash trading is a form of market manipulation where an individual simultaneously sells and buys the same financial instruments to create misleading, artificial activity in the marketplace. Wash trading is illegal under securities law because it misleads investors and regulators about the true supply and demand of the securities involved. Wash trading can also be used to evade taxes, inflate prices, or launder money.”

The document titled “Market Manipulation” published by the Financial Industry Regulatory Authority (FINRA). You can access it by clicking here. This document states that “Wash sales are a form of market manipulation in which an investor simultaneously sells and buys the same security to create misleading, artificial activity in the marketplace. Wash sales are illegal under Section 9(a)(1)(A) of the Securities Exchange Act of 1934. Wash sales can be used to manipulate the price of a security, evade taxes, or launder money.”