The vast majority of people who have been involved with Herbalife have lost money. The company claims that anyone who loses money is really a customer (not a distributor), but the truth is there are millions of failed distributors.
The majority of businesses fail in general. I agree that MLM isn't the most ethical industry, but MLM will exist. Do you really think the government would shut it down, forcing distributors to lose their livelihood and a lot of money in rapid fashion?
I think Ackman is toast in this short position, partially because he brought it upon himself by creating a public circus around an investment position. Short sellers like to do this, but many of the best short sellers don't have to, and you never read about them or their positions in the news.