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@naganny: Those shorts have to be covered. If Melvin becomes insolvent, all assets are liquidated to cover. If those aren't enough, the brokerage is on the hook and they start covering. If those aren't enough, the brokerage has to start liquidating to cover. If its still not enough, it bubbles up to the next bank in the chain.

The stocks HAVE TO BE COVERED. That is the end of the story.