The allegations/charges against Home Capital were based on a debatable failure to disclose possible fraud by their suppliers(mortgage brokers) in a timely manner. That was it.  Yet insured and uninsured depositors led by their professional advisors, institutional and mutual fund investors( those who are paid not to panic) all bailed because of a disclosure issue. 
The short sellers were not smart. Just lucky. They figured the real estate market was going to crash. But rather than shorting the big banks why not short the most vulnerable. HC was a small fry holding higher risk mortgages. They never expected the OSC charges would have such a devastating effect. It shocked them as much as anyone.