People are increasingly using social media to 'pump and dump' shares while unwitting participants are left with heavy losses.
Financial watchdog ASIC said more attempts are being made to co-ordinate share price increases, which could be illegal market manipulation.
'Pump and dump' starts with an investor organising others to buy the same shares, often by spreading misleading information (the 'pump').
The same investor intends to sell once a short-term price peak is achieved (the 'dump').
The Australian Securities and Investments Commission said many people who participated in these schemes became victims as the organisers sold shares and took profit earlier than expected.
Penalties for market manipulation can include fines of more than $1 million and up to 15 years jail.
ASIC commissioner Cathie Armour said the watchdog monitored share market trading using sophisticated software.
Earlier this year, retail investors used social media platform Reddit to organise dramatic increases to the share price of US video game retailer Gamestop.
The organisers claimed to want to inflict financial damage on professional investors who had bet that the stock would fall.
Many who participated in the scheme ended up losing money.
