Melvin Capital closed out its short position in GameStop on Tuesday afternoon after taking a huge loss, the hedge funds manager told CNBCs Andrew Ross Sorkin.

GameStop, hedge funds most-hated stock, was targeted by an army of retail investors who marshaled forces against short sellers in online chat rooms. In the Reddit forum wallstreetbets with more than 2 million subscribers, rookie investors encouraged each other to pile into GameStops shares and call options, creating massive short squeezes in the stock.

CNBC could not confirm the amount of losses Melvin Capital took on the short position. Citadel and Point72 have infused close to $3 billion into Gabe Plotkins hedge fund to shore up its finances. On Wednesdays Squawk Box, Sorkin said Plotkin told him that speculation about a bankruptcy filing is false.

GameStop shares have soared more than 400% this week alone to $347.51 apiece, driving its January gains to 685%. The stock was worth just $6 four months ago.

Shares of the brick-and-mortar video game retailer popped another 134% on Wednesday, pushing the companys market cap to $24 billion.

GameStop was the single most traded name in the U.S. stock market on Tuesday, topping Tesla and Apple, even though they are 81 and 233 times larger in market cap terms, according to Deutsche Bank strategist Jim Reid.

Amid GameStops explosive rally, short sellers have accumulated losses of more than $5 billion year to date in the stock, including a loss of $917 million on Monday and $1.6 billion on Friday, according to data from S3 Partners.

Short seller Andrew Left of Citron Research said Wednesday he has covered the majority of his short position in GameStop at a loss. He previously said GameStop will fall back to $20 a share fast and called out attacks from the angry mob that owns the stock.

Investor Michael Burry said in a now-deleted tweet Tuesday that trading in GameStop is unnatural, insane, and dangerous and there should be legal and regulatory repercussions. Burry shot to fame by betting against the housing bubble and was featured in Michael Lewis book The Big Short.

The Securities and Exchange Commission declined to comment.

Social Capitals Chamath Palihapitiya is among those who jumped into the stock, saying in a Tuesday tweet that he bought GameStop call options betting the stock will go higher. His tweet seemed to intensify the rally in the previous session. The stock ended the day 92% higher at $147.98.

After Tuesdays closing bell, Elon Musk commented on the mania, linking it to the wallstreetbets Reddit chat room. The Tesla CEO tweeted to his 42 million followers Gamestonk!! The comment appeared to help send GameStop shares soaring in extended trading Tuesday.

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