hedge fund manager wants to short Herbalife, gets FTC to probe whether they're a pyramid scheme [View all]

[yurbud]

I hate pyramid schemes, and for all I know, Herbalife could well be one.

But when I heard a version of this story on NPR and that the hedge fund manager pushing the FTC investigation bet over $1 billion on Herbalife stock going down to zero, it seemed like another indication of the cancer in our financial sector and our government, because:

A) this asshole is trying to make a buck by breaking a business not making one

B) regulatory agencies and even Congress seem to only act when such an asshole wants them to.

Can someone explain to me why shorting like this is legal?

Herbalife hit by US ‘pyramid scheme’ probe
By Dan McCrum
The US Federal Trade Commission has opened a formal investigation into Herbalife, the multi-level marketing company that hedge fund manager Bill Ackman has called a pyramid scheme.

Close government scrutiny of the Los Angeles-based group is the latest turn in a vicious public battle where rival billionaires have bet fortunes on the question of Herbalife’s legitimacy since Mr Ackman’s hedge fund, Pershing Square, unveiled a campaign to put the company out of business in December 2012.

http://www.ft.com/cms/s/0/cdde3864-aa0e-11e3-8bd6-00144feab7de.html#axzz2vrSBYy1e