This pertains to a form of market manipulation wherein investors produce artificial activity in the market place through the simultaneous buy and sell of cryptocurrencies. There are instances wherein Wash Trades are administered through the collusion of a trader and a broker. At other times, the Wash Trades are performed by investors who act as both a buyer and seller of the security.
In the United States, Wash Trading is illegal. The IRS prohibits taxpayers from deducting losses from Wash Trades in their taxable income. Wash Trading became a popular way for stock manipulators to signal interest falsely within a stock in an effort to pump up the value. This they do to make money shorting the stock.