Comment by sjehay

If they are short Madoff, it's in their interest for its value to go to zero - i.e. him getting shut down by law enforcement makes them a lot of money, so their incentives are very much aligned with those of the regulators. (If you're cynical, you might argue that in an ideal world they'd like the rest of the world to remain in the dark for long enough for them to build up a sizeable position first). Conversely, investors would benefit from it finding more investors before being shut down so they could cash out first.