Stock manipulation and insider happen all the time, but is usually not easy to prove. The worst cases are so big that they are not prosecuted because it would harm "the system"- the same way the banks are too big to fail, and too big to jail. Shorting is legal (I'm one of those who think it shouldn't be), but is often prohibited in loans, so that the lender can't short the stock and reduce the price in order to get more shares upon debt conversion. Martha Stewart was a small fish who was specifically targeted while the big sharks got away.