Since China's reform and opening up for forty years

countless Chinese enterprises have been listed on various exchanges

but due to the lack of experience

the financial fraud of enterprises has become more and more intense. The short-selling mechanism

as an emerging financial counterfeiting mechanism different from internal self-investigation and external auditing

has high enthusiasm in investigating financial counterfeiting due to its strong conflict of interest with enterprises

and has a superb effect on suppressing corporate finance. This paper introduces the background of both sides in the case of Muddy Waters' shorting of Huishan Dairy and the game in the release of the two shorting reports

as well as the final results of the case. At the same time

it analyzes the advantages and disadvantages of the short-selling system in suppressing financial fraud and gives the corresponding counterbalance to the short-selling system

so as to maximize the effect of its suppression of financial fraud. Finally

it is concluded that the short-selling mechanism can make up for the deficiencies of the existing system and help stabilize the social equilibrium as a more aggressive and effective fraud-suppression mechanism.