Liquidity is simulated. Momentum is staged. A market begins to form where none truly exists.
Then enters the real objective: a party that needs profits — on paper. He buys in. Sizeable enough to matter. The price is nudged higher, often aggressively. On exit, the numbers look clean: a large capital gain, transacted on exchange, fully documented.
In jurisdictions where capital gains are not taxed, it looks even cleaner. No tax. No question. Just profits — to justify cash flows, investments and expenses.
Except that is not what it is.
See also: Profit without purpose, purpose without profit
What looks like market-driven gains can, in substance, be something else entirely:
- Circular trading dressed up as liquidity.
- Coordinated counterparties posing as independent demand.
- Price discovery replaced by price engineering.
This is not theoretical. Variants of it have appeared across markets — sometimes crude, sometimes sophisticated. The mechanics are not complex. Which is precisely why they attract attention.
See also: The economy is not a sports league
But remember, modern markets do not just record prices. They record relationships.
Regulators like the Securities Commission Malaysia and the Monetary Authority of Singapore do not need to catch intent in real time. They can reconstruct it later:
- Who traded with whom.
- How often the same accounts reappeared.
- Whether trades were economically meaningful or merely circular.
- Where the funding originated, and where the proceeds ended.
Layered on top are anti-money laundering controls — at brokers, banks and custodians. Gains that appeared engineered rather than earned do not just raise regulatory concerns; they raise questions on legitimacy of funds.
The common misconception is that if capital gains are tax-exempt, the outcome is acceptable. But tax treatment does not validate the transaction. Substance does. And substance is where these structures tend to collapse.
Yes, there are moments when scrutiny lags. Yes, some trades pass without immediate challenge.
But the system does not forget.
For more stories about where money flows, click here for Capital Section
Every trade leaves a counterparty. Every account has a beneficial owner. Every pattern, once visible, becomes hard to explain away.
Conclusion: It is not about whether regulators ask the right question. It is whether the trade can survive when the right questions are eventually asked.
Because in markets, delay is possible. Erasure is not.
Note: If I lack details, it is because I am careful NOT to write a playbook and run afoul of the law.
