I'm not sure what the truth is here, but if the accusations are correct I think it's fraud level stock market manipulation.
I've only seen those accusations on reddit and twitter. The only "evidence" I've ever seen in support of those accusations is repeated citation of short interest. Short interest is an aggregate figure which doesn't track specific firms, so it can't be used to discover if an individual fund closed or opened a short position.
Random redditors, and they were quoted by CNBC and the like
The post I replied to asked what people are demanding. They are demanding that institutions not lie to manipulate the market. I am not claiming this lying ever took place.
> The only "evidence" I've ever seen in support of those accusations is repeated citation of short interest.
In addition to that, they claimed that volume in GME was not high enough for the shorts to be closed. I'm not familiar enough with the markets to know what I don't know here though.
dark pools/OTC trades, maybe?
Put yourself in the firm's position and think about this from a game theoretic perspective...what is the upside in lying? The thinking is that you might convince people to lay off the voracious buying if you make it seem like the short squeeze isn't possible because you're out? That seems like a stretch and would require navigating lots of wild assumptions about why this almost unprecedented price action is happening.
On the other hand, there is tons of downside. If the plan doesn't work and the price continues its meteoric rise, you're bankrupt. If you're caught lying, you're additionally hit with securities fraud. Then the veil is pierced and the partners are at risk of losing their money. On top of this if your investors are savvy they'll sue you for breaking fiduciary duty because you didn't close out a position that makes selling naked SPY calls look safe. This also puts the partners' private capital at risk.
It would be cartoonishly dumb to lie about closing the position instead of actually doing it.