Wash trading is a form of market manipulation where a trader buys and sells the same security simultaneously, or in a short period, to create the appearance of market activity or to manipulate prices. This can be done to:

1. _Create fake volume_: To give the impression of market liquidity or interest.

2. _Manipulate prices_: To influence prices up or down.

3. _Meet trading requirements_: To fulfill trading quotas or requirements.

4. _Disguise trades_: To hide real trading activity or intentions.

Wash trading is illegal and can be detected through:

1. _Trade surveillance_: Monitoring trading activity for suspicious patterns.

2. _Trade reporting_: Analyzing trade reports for matching buys and sells.

3. _Market monitoring_: Identifying unusual trading activity or price movements.

4. _Account monitoring_: Reviewing trading accounts for suspicious activity.

5. _Whistleblower tips_: Receiving tips from individuals with knowledge of wash trading.

Penalties for wash trading can include:

1. _Fines_: Financial penalties imposed by regulators.

2. _Suspension_: Temporary or permanent suspension of trading privileges.

3. _Criminal prosecution_: Legal action for fraud or market manipulation.

4. _Reputation damage_: Loss of credibility and reputation in the market.

It's important to note that wash trading can be difficult to detect, and regulators and exchanges use sophisticated tools and techniques to identify and prevent this type of market manipulation.