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Originally Posted by Know me.
"Sell" people GME stock at $450 and don't actually transact against a real exchange. Place a halt on buys, crash the price to $150 and pocket the $300. Job done.
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That's almost exactly what the funds were doing by shorting the stock. Borrow high, sell high, crash, buy them back low, give the stock back and pocket the difference.
But in GME's case, they were 140% shorted, meaning the hedge funds shorted more shares than what existed. They were caught with their pants down and the world (i.e. /r/WSB) noticed. Now they're scrambling to get the capital required to close their positions before the price to buy the stocks back raises any higher - or option B, shady tactics.
I guess the hedge funds think the risk of jail time and class action law suits are less damaging than the potential market impact. They would rather commit securities fraud on a global scale and deal with the fallout of that than lose the bad bet they made. It’s the cheaper option.
I.B. Chairman Admits to Market Manipulation on Live T.V.