Notwithstanding the activity over the last weeks, do you think Melvin as an entity, Plotkin, Ackman, Dalio, or the great Buff man care who specifically is on the other end of a trade, ever? Have you ever cared about whether the share you just bought was sold to you by a nearly destitute widow about to be out of money? You have no fiduciary duty over Melvin's fund. By just about any measure Melvin took a pretty rational position against GameStop, but was too aggressive in scale and hedging.
There have been short squeezes before and there will be others in the future. As far as I'm concerned the sensationalization of this one by the media is criminal. The people involved are in it to make money, you've got to be kidding yourself if you think there was no institutional money also adding fuel to the fire on the buy side of last week. I don't buy for one second that all of this materialized by small retail traders.
The real moral of the story here is that no one is sticking it to the "banksters" by buying a $2 company for $300. A lot of greedy fools are being separated from their money. And some of the greedy fools will live to lose their gainz another day.
Whatever happens to a hedge fund and its investors' money isn't your concern. Hedge fund investors were there for a high risk high reward strategy. Investment advisers who bring their funds to a hedge fund may have some explaining to do when the strategy goes sideways like it did here. I'm sure there will be congressional hearings and lawsuits about whatever institutional "safeguards" were ignored, skirted or failed.
Separately, short selling isn't some immoral endeavor just because Elon Musk complains on Twotter when people question Tesla's valuation (incidentally there have been a number of short squeezes in Tesla's history). You better believe Elon isn't going to bail out any of the GameStonk crusaders when the music stops on this one, neither would Melvin's "Goodwill" clients or whoever else you think was on the other side of any of your trades.