Shorting a stock has a time limit. You owe that stock back later, plus a fee.
If you borrow the stock at $20, thinking it will go down, and it does go down to $10, you buy one share at $10 and keep the $10, minus perhaps a $1 fee, for a $9 profit.
If the stock goes up, you lose money.
This is more about naked shorts, which are illegal. It means someone pretends to give you stock to short but they don’t actually have any. It is a fraud contract on the market. This is what is happening here. Hedge funds have fraud contracts they’sold’ to each other; illegal naked shorts. Naked, because the contracts have no real stock behind that that is involved.
A loans stock to HF.
HF sells stock to B.
B loans stock to HF.
HF sells stock to C.
B now owes a share of stock to A & B. Yet, there is only one share of stock involved.
This is the problem with being able to sell something you don’t own.