OP, the short answer is the stock touts on Reddit (some of whom might also be posting here) are full of shit.

There WAS a massive short interest, back in January 2021. At that time, it was more than 100% of the float short (134% is what I remember seeing). But that is no longer the case. Today, it is about 21% short, which is considered high but not in any way a danger of a short squeeze. The number of days to cover is only about 4, which is nothing to the big boys.

https://shortsqueeze.com/?symbol=gme&submit=Short+Quote%E2%84%A2

The massive short happend in early 2021. It is over. Notice, it got to the price of $480 per share (which would be $120 today, post-split), but did NOT get to the price of $Moon.

GME is a company in trouble, financially. I don't know who is behind the Reddit bullshit, but they sure did come in handy when GME almost went bankrupt a year ago (the big short squeeze allowed the price to go high enough, that the company was able to do a secondary offering to get cash, which saved their ass).

The shorts were right, and the longs did put them into a squeeze, but only because the shorts were committing the crime of naked shorting. They got away with it, too.

Today, the hope and prayer of the longs is that the company's NFT strategy plays out and/or there is some super-secret shorts that are "not being reported to the SEC."

Although I would not put anything past the same people who criminally naked short, I see no solid evidence that this is really happening. Looks more like stock touts circle jerking, possibly for profits (the volatility makes it a good stock for short-term trading for some people who trade those types of stocks).

What's to stop the 'big guys' from simply 'erasing' the transactions that say they have a short position?

Nothing. They don't really have to erase, so much, as to simply buy and sell inside of a prime broker, and ultimately unwind their positions. Remember, it is not the shorts (let's say hedge funds are the shorts) who are committing the crimes. They don't really know if the shares they short are legal or illegal nakeds.

It is the prime brokers (such as Goldman Sachs and others) who create the fake shares that they lend out to the shorts (hedge funds, mostly).

It is, therefore, the prime brokers who would have to do the unwind -- which is what I suspect happened in 2021.

But that particular danger is no longer there, IMO. If it is, they will just do the same this time around.

If the loss to any one entity is large enough, what's to stop them from simply declaring bankruptcy (or some similar 'out')?

I don't know exactly which entity you refer to, whether GME, a short hedge fund, or a prime broker.

If GME declared bankruptcy, which they were almost forced to a year ago, then that would be a BIG WIN for the shorts, because they would effectively never have to cover, and they would just keep the cash from their short.

If a hedge fund was insolvent, they would have to liquidate and close the fund, returning what remains to the investors. If there was a massive hidden short position, the risk would fall to the prime brokers, not the hedge funds.

If the prime brokers really do have a large, hidden short, then you can bet they unwind a bit every now and then when the stock price falls (like it is doing today). But I don't believe they do. If push came to shove, they would likely be betting on inventing a cover story to get the Federal Reserve and/or US government to bail them out.

Most people don't know that Goldman Sachs WAS an investment banker, but during the 2008 financial scam, they became an official bank, too, which means they can DIRECTLY borrow from the Federal Reserve. And since the same people benefit both from the fraud of naked short lending by the prime brokers and the fraud of money created from nothing by the private Federal Reserve Bank, it would be VERY difficult to rock their world by shorting (or buying) a small company like GME.

This is, IMO, why the fraudulent stock touts have had to come up with a creative story that pushes emotional buttons to push their story.

They have a lot of accusations, but no real substance to their claims.

GME is going down today, along with a general market sell off. The key will be what happens over the next few weeks. A lot of people believe that a stock split automatically makes the price of a stock go up.

Not true. The hard lessons will have to be learned, individually. I earned my fuck ups in the market, and other people will, too.