shorting is not illegal, the uptick rule after the elimination of 1/8 was easy to overcome, by putting a buy order 0.01 cent over market. People were still able to achieve a "short" position, or just short an index/etf.
Manipulation, as far as the SEC is concerned, is only when someone falsely lowers or raises a price (via rumors, etc) such that they can unload or load up.
So, they can only go after naked short sellers and manipulators. Shorting brings balance to the market.
Right, shorting brings balance to the market and is a form of making money in the overall market.
However, when the playing isn't even (naked shorting and eliminating the uptick rule that was originally put in place to even the protect the manipulation of markets) good companies with small floats can get taken down faster and harder than they would than if they has some fundamental problems. Long investors are easier to take advantage of.