Shorting GE before making the accusations is profiteering in my book. If it turns out they were wrong they'll still be able to make money on the short, buy back in with the profits and then when the stocks rebound they cash in again.
The entire stock market is a ponzi scheme for insiders.
No they will not. There are no rules against exaggerating information about a company you don't operate. The SEC does not fine hyperbole as it's not covered by the exchange act.
The so-called short-and-distort scheme may violate the Securities Exchange Act anti-fraud provisions, as well as SEC Rule 10b-5, just like the better known antithetical "pump-and-dump" scheme. It checks all the boxes: (1) misrepresentation to the market (through articles, blogs and social media); (2) materiality (often including false statements about a company's financial condition or viability); (3) an intent to deceive (manipulating the market to create downward pressure on the share price to make a profit); and (4) connection to the purchase or sale of securities (initiating a selloff of securities to allow the short seller turned analyst to cover their short position). Likewise, this scheme may violate state securities and consumer protection statutes and common law.
https://www.dlapiper.com/en/us/insights/publications/2018/10...
I doubt that this reflects the regulatory complexity. "Everything is securities fraud" as Matt Levine often says.
It's also how you call companies out on their bullshit and counter their PR deflection game.
And yep, if I do a shit load of accounting research, figure out one of the biggest conglomerates has about $38 billion in fraud, you bet your ass I expect to get paid for the effort. I'm morally on board with the authors getting the first shorts in.
Explain
This assumes the report is, in fact, exaggerated.
This would be called "short and distort". That'll win you a friendly visit from the SEC.