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Market Misconduct & Digital Assets

If a crypto token is a financial product, the market misconduct provisions in Part 7.10 may apply, subject to market and jurisdiction conditions.

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Part 7.10, Corporations Act

If a crypto token is a financial product, the market misconduct provisions in Part 7.10 (market manipulation, false trading, insider trading and misleading conduct) may apply. The market manipulation and false trading provisions turn on trading on a "financial market" (s 767A) operated in this jurisdiction. The insider trading provisions apply to "Division 3 financial products". (The separate "market integrity rules" are made by ASIC under s 798G for licensed markets and their participants.)

Insider trading (s 1043A):

A person who possesses inside information about a Division 3 financial product must not: (a) deal in that product; or (b) procure another to deal; or (c) communicate the information to another who is likely to deal or procure dealing.

Crypto application:

  • Core team members trading before protocol announcements
  • DAO contributors with knowledge of treasury decisions
  • Validators/miners with MEV-derived information advantages
  • Exchange employees with order book visibility

Market manipulation and false trading (ss 1041A–1041C):

  • Wash trading on centralised exchanges
  • Pump and dump schemes coordinated on social media
  • Spoofing / layering on order books
  • Oracle manipulation in DeFi

Open question: Sections 1041A, 1041B(1) and 1041C refer to financial products traded on a "financial market operated in this jurisdiction" (or similar). For a token traded only on an offshore exchange or DEX, whether these sections apply is a threshold question. Whether a particular offshore or DEX venue is "operated in this jurisdiction" (see s 791D) is untested.

Market integrity and digital assets: the detail

  1. The Statutory Framework

Part 7.10 of the Corporations Act 2001 (Cth) deals with market misconduct. The threshold question for crypto is: is the token a "financial product" (s 763A, or a specific product listed in s 764A)?

If yes, the Part 7.10 prohibitions can apply: insider trading (s 1043A, for Division 3 financial products), market manipulation (s 1041A), false trading and market rigging (ss 1041B–1041C), and misleading or deceptive conduct (s 1041H).

Recent Australian cases make this concrete:

CaseYearHolding
ASIC v Web3 Ventures (Block Earner) [2026] HCA 21 (17 June 2026)2026High Court ruled for ASIC 7-0: fixed-yield crypto product = financial investment facility and derivative
ASIC v Finder Wallet [2024] FCA 228; ASIC v Wallet Ventures [2025] FCAFC 932024, 2025Crypto earn product held NOT a debenture; ASIC appeal dismissed
ASIC v BPS Financial [2024] FCA 457; [2025] FCAFC 742024, 2025Qoin wallet a non-cash payment facility (found by the Federal Court); BPS could not rely on the authorised-representative exemption
ASIC v Bit Trade Pty Ltd [2024] FCA 9532024Margin extension = credit facility; DDO breach (no TMD); $8m penalty [2024] FCA 1422

Takeaway: ASIC has won key cases establishing that crypto products with yield, payment or derivative features can be financial products, and lost others (Finder). These are licensing and product cases, not market misconduct cases. But once a token is a financial product traded on a financial market, Part 7.10 is in play.

  1. Insider Trading (s 1043A): Crypto Application

Section 1043A prohibits dealing in Division 3 financial products while in possession of information that is:

  • not generally available (s 1042C), AND
  • if it were generally available, a reasonable person would expect it to have a material effect on the price or value of the products (s 1042A definition of inside information; s 1042D explains material effect)

"Division 3 financial products" are securities, derivatives, MIS interests, certain government debentures, certain superannuation products, and any other financial products able to be traded on a financial market (s 1042A). Jurisdiction conditions are in s 1042B.

Crypto-specific risk scenarios:

Core team / foundation employees:

  • Knowledge of protocol upgrades, tokenomics changes, partnership announcements, exchange listings
  • Directly analogous to corporate insiders. If the token is a Division 3 financial product, this is plain s 1043A exposure.

DAO contributors with governance access:

  • Knowledge of treasury diversification, grant allocations, fee-switch activations
  • The "inside information" question turns on whether the DAO's governance process makes the information "generally available" before it's executable. Public governance votes are generally available, but pre-vote coordination in private contributor channels may not be.

Validators / MEV actors:

  • This is the open question. MEV (Maximal Extractable Value) involves validators/searchers with transaction ordering advantages. Under AU law, the question is whether mempool information constitutes "inside information" about a financial product. Our view: for tokens that are Division 3 financial products, it may be. Whether pending transactions in a public mempool are "readily observable matter" (s 1042C(1)(a)) is a real argument the other way. No Australian court has decided this.

Exchange employees:

  • Staff with order book visibility or advance knowledge of listings. If the token is a Division 3 financial product, this is s 1043A exposure, subject to the jurisdiction conditions in s 1042B.
  1. Market Manipulation (ss 1041A–1041C): Crypto Risks

s 1041A: Market manipulation proper:

  • Transactions that create or maintain an artificial price for trading in financial products on a financial market operated in this jurisdiction
  • Wash trading on CEXs can fit: inflated volume creates an appearance of liquidity
  • Coordinated pump-and-dump via social media groups: if the token is a financial product traded on such a market, this is s 1041A + potentially s 1041B (false trading)

s 1041B: False trading and market rigging:

  • Conduct that creates a false or misleading appearance of active trading, or about the market for or price of financial products, on a financial market operated in this jurisdiction
  • Bot-driven wash trading
  • Spoofing/layering on order books: placing and cancelling orders to move price

s 1041C: Artificially maintaining a trading price:

  • Fictitious or artificial transactions or devices that maintain, inflate or depress a price, or cause fluctuations
  • Market-making arrangements that guarantee a floor price
  • Token buyback programs designed to prop price during unlocks

DeFi-specific manipulation:

  • Oracle manipulation (moving the price feed a protocol relies on)
  • Flash loan attacks that manipulate AMM pricing
  • Sandwich attacks by MEV bots
  1. The Jurisdictional Question: Offshore DEXs

This is the hardest open question.

Does ASIC have jurisdiction over a DEX that is not "in" Australia?

Section 767A defines a "financial market" as a facility through which offers to acquire or dispose of financial products are regularly made or accepted. Operating a financial market in this jurisdiction generally requires an Australian market licence (Part 7.2). Part 7.2A gives ASIC supervision of licensed markets and power to make market integrity rules binding market participants and operators (ss 798F, 798G).

For an offshore DEX:

  • Insider trading: s 1043A applies to acts within this jurisdiction, and to acts outside it in relation to Division 3 financial products issued by a person who carries on business in this jurisdiction or a body corporate formed here (s 1042B). So an AU-linked token can carry insider trading exposure even on an offshore venue.
  • Manipulation and false trading: ss 1041A–1041C reach conduct "whether in this jurisdiction or elsewhere", but the effect must be on a financial market operated in this jurisdiction. Manipulating a token's price solely on an offshore venue does not fit neatly within those sections. Other provisions (for example s 1041H misleading conduct, or s 1041E false or misleading statements) may still be relevant.
  • But ASIC's practical enforcement power over the DEX itself (injunctions, disgorgement) is very limited for a truly decentralised protocol with no identifiable AU operator.

If ASIC tried to pursue a DEX, it would likely look to an interface operator or identifiable developers with an Australian connection, rather than the smart contracts themselves.

Practical answer: ASIC can pursue AU persons for insider trading in AU-linked Division 3 financial products wherever the trade executes. The manipulation provisions need a link to a financial market operated in this jurisdiction. ASIC cannot regulate the DEX infrastructure itself unless there's an identifiable operator with an AU connection. That leaves a gap in practical enforcement.

  1. Practical Guidance: Who Is Exposed
ActorRisk LevelKey Exposure
Token team insiders (AU entity)Highs 1043A insider trading; ASIC enforcement
CEX employees (AU-licensed)Highs 1043A + market licence conditions
Wash traders on AU marketsHighss 1041A–1041C; criminal and civil penalties available
DAO contributors (AU-based)MediumDepends on token classification + information access
MEV searchers (AU-based)Medium to highUntested but exposure is there if token = Division 3 financial product
Offshore DEX protocolLow (for now)No AU nexus = no practical enforcement
AU person trading on offshore DEXMediumInsider trading liability possible (s 1042B); manipulation provisions need an AU market link

Bottom line: If a crypto token is a financial product (and the High Court's 2026 Block Earner decision confirms how wide that category is), Part 7.10's market misconduct provisions can apply to trading in those products, subject to the market and jurisdiction conditions in each section. The law is there. ASIC's willingness and capacity to enforce it in crypto markets is the variable.

This is general information, not legal advice.

Questions? Email [email protected].

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