It's not fraud. Let's say you buy ZN one day and sell it a few hours later in the same day. Since your original purchase hasn't settled yet (T+2 nowadays) you are selling the stock short.
Next day you do it twice. Now you have shorted the stock x3. At this point the regulations kick in and you better not short it again or you are looking at a trading suspension.
A good broker won't even allow you to get that far, as most of them have rules that are even more conservative than the govt. or FINRA allow.
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