However, if conversation shifted from such analysis to how best to manipulate the stock price to move in a certain direction irrespective of the fundamental value of the underlying business, they lost me.
The fundamentals are that the company is worth about $20. So this was always an attempt to create a short squeeze based upon Melvin's overexposure. Funds bet against other funds this way all the time, and it's considered a non-issue. They just figure that if they can push the price above x, then the other party will be forced to cover. The only difference here is that the instigators of the short squeeze were "unsophisticated investors", and that they should not be allowed to make such a bet against professional players. It's pretty clear "unsophisticated investors" should be allowed to buy whatever they like, for whatever reason they like.
In terms of collusion, you know that there are newsletters that send messages such as: "we advise members to buy stock x up to $1". That's perfectly legal. If such a newsletter now had 10 million subscribers, and they all jump on a stock, then it must still be legal. If the newsletter said to its 10 million subscribers "stock x is massively overvalued, we suggest members shorting above $1", that also must be within the rules. Price drops because of the sheer weight of numbers. So the thing about the claim of collusion is that it won't stick. That angle won't work.
Squeezing a fund and its unit holders into bankruptcy is unethical though. A different issue. The regulator might try to broker a deal between both parties before the price gets out of hand.
