The Controversy Surrounding Short Selling in Bank Shares.

Federal prosecutors in Washington are investigating short seller activity around the recent volatility in U.S. bank shares sparked by the failure of three regional lenders since March. The Justice Department is looking for potential securities market manipulation, and other regulators are also assessing potential market manipulation by short sellers. Short sellers have profited from the banking crisis, reaping $1.2 billion in paper profits during the first two days of May, according to data from analytics firm Ortex.