"So what happens to those investors when the hedge funds have to cover?"
They don't have to. No one is forcing them to. Some stocks have been on the fail-to-deliver list every day since it was started last January. They are supposed to be forced to "buy-in", but they don't; and the SEC is doing absolutely nothing about it (funny, they are called SROs; self regulating organizations). And besides that, many hedge funds are moving off-shore so that U.S. laws cannot touch them. Do they know the party will eventually end?
Now, to make matters worse, there is another class of settlement between brokers called "Ex-clearing" that doesn't even go through the DTCC or show up on the SHO list. The fraud here is estimated to be 4-5 times as bad as the SHO list. This is where the picture gets ugly huge. This may be the house-of-cards that the SEC wants to ignore. But the crooks just continue to say it is not happening when there is proof that it is. But they won't show the "ex-clearing" fail-to-deliver data because they know how bad it is. Where do you think all those $500K+ bonuses are coming from this year? (avg. Goldman bonus)
How many pension funds and 401Ks, etc. would be much larger now if these scumbags weren't selling down the value of their holdings with fake shares?
Where is that scummy NYT, or the Washington Post, or Forbes, Time, Newsweek? Or Drudge, even? Investigative reporter is something kids read about in history books now.
Well, if they want to realize a profit they'll have to buy.
How many pension funds and 401Ks, etc. would be much larger now if these scumbags weren't selling down the value of their holdings with fake shares?
That depends. Are there any S&P 500 stocks on the SHO list? How about Google?