Absolutely NOTHING happened with Cornell and CTGI. CTGI paid them off a bit early, partially with stock and it was a standard, completed transaction.
IMO, financial firms such as Cornell (who has a horrible reputation) and La Jolla who issue PIPEs (Private Investment Placement Equity) short in one situation. Only when they feel the loan has been a huge mistake and they realize they'll never get full payment so they try to mitigate the loss by being proactive and shorting the stock to protect their asset.
As has been stated, the Government has cracked down a bit on some PIPEs and they're all aware their activities are under scrutiny. If they want to continue in business, they've got to conform more to normal business practices.
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