The regulatory pressure on short sellers is mounting as the Senate Judiciary Committee has launched its own inquiry into whether improper short selling helped sink shares of
Vonage after its disastrous IPO.

The committee which is planning hold hearings on hedge funds, independent research and short selling on Wednesday of next week, has contacted Vonage about the possibility of testifying as well as the New York Stock Exchange, which has already launched its own investigation on the matter.

Shares of Vonage have declined sharply since its IPO in May.  The stock was  priced at $17 a share, but quickly sank to under $9 a share.  A spokeswoman for Vonage says the company is not planning to testify, though that may change if it is subpoenaed. A spokesman for the NYSE had no comment.  

The Judiciary Committee's interest shouldn't be taken lightly.  While the committee doesn't have oversight of stock regulators like the SEC, it has direct oversight of the U.S. Justice Department, which has stepped up its scrutiny of Wall Street and white-collar offenses. People on the committee tell me that representative of the Justice Department will be present at the hearing.

One person who wont be at the hearings is Patrick Byrne the head of Overstock.com, who is probably the person most responsible for the growing interest of stock regulators and now Congress into the issues surrounding short selling and a practice known as "naked short selling" where short positions are created without taking physical delivery of the stock. Keep in mind that ranking Judiciary Committee member Orin Hatch represents Utah, the home of Overstock.