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Hedge fund manager Bill Ackman called Herbalife (NYSE:HLF) a pyramid scheme Wednesday. He also confirmed that he has been shorting the stock for most of the year.

Herbalife's chairman and CEO Michael Johnson seemed fit to be tied when he spoke to CNBC Wednesday afternoon. Ackman, founder and CEO of Pershing Square Capital Management L.P., announced that concerns he had about Herbalife's business model prompted his position. As market players learned that he was shorting Herbalife, the company's stock went into a tail spin. It went down by as much as 15%. It closed at $37.34. This was well below its previous 52-week low of $42.15.

Ackman is widely known for having long positions in stocks, so the fact that he was shorting Herbalife spoke volumes to market players who thought, "Well it must be something to it." That something relates to allegations that the company's business model mirrors that of a pyramid scheme. Johnson begged to differ.

"This is not about Herbalife's business model. It's about Ackman's business model," Johnson ranted on CNBC Wednesday afternoon. "This is blatant market manipulation. It's an attempt to illegally manipulate the market by a group of short sellers."

As far as the pyramid scheme allegation is concerned, Johnson said it was a ridiculous assertion by people who are trying to manipulate Herbalife's stock. While Johnson was clearly peeved about his company being called a pyramid scheme, he was equally, if not more, peeved about the announcement coming just two days (Friday) before more than 33,000 put contracts are set to expire.

At the time of writing, the December 35 put options had the largest volume. About 11,000 contracts were traded. The open interest was 4,000. The implied volatility has increased to 132 for Herbalife's December put options, reflecting the bearish sentiment about the stock and the likelihood that there will be larger price movements, making the stock more risky.

As he called for an investigation into the matter by the Securities and Exchange Commission, Johnson said, "Mr. Ackman's proposition that the United States would be better when Herbalife is gone, the United States will be better when Bill Ackman is gone."

I don't have a dog in this fight, but I can't help but to wonder why Herbalife has drawn so much scrutiny. It has repeatedly had to answer allegations that it is a pyramid scheme. Ackman is not the first fund manager to question Herbalife's business model. Short-selling activist David Einhorn has also raised concerns. He questioned the company's business model in the spring. At that time, Herbalife's stock slid from around $70 a share to around $45 a share.

Also interesting about this entire situation is Johnson's claim that his company did not have the chance to speak to Ackman. Johnson said Ackman refused his company's request to attend today's presentation. He also took issue with investors basing their opinions on a research report that he has yet been given the chance to review.

Shorting Herbalife is the best trade now. There is no catalyst that will cause shares to rise in value at this point. The next catalyst to move the stock may occur in February when it announces its fourth quarter earnings for 2012.

Herbalife is investing in a $100 million facility in North Carolina that could bring 500 jobs to the state. When the facility's renovations are finished, it will be the company's largest manufacturing facility. This announcement was made this week, but was overshadowed by Ackman's confirmation that he has been shorting the stock.

No matter what happens today, in terms of how Ackman justifies betting against Herbalife, I don't see this as a stock to own for long-term investors. Unfortunately, the company known for its nutritional and weight-loss products may still get the short end of the stick.

Source: Herbalife CEO Says U.S. 'Will Be Better When Bill Ackman Is Gone'