It was blocked in Robinhood's UI, but on the back end the hedge funds could trade at will. And the hedge funds had to buy a lot of stock to cover their shorts, so it was handy to get the retail buyers out of the way.
Or actually, "outsources" is a misnomer because Citadel pays them for the orders, so they can make money front-running them. That's why Robinhood trades are "free" for their retail users. You don't pay a fee but you get a slightly worse price.
Citadel also, fwiw, just loaned $2.5B to a fund with a lot of short exposure to GME.