> Please correct me if I’m wrong.

You are, about pretty much all of this.

Being a market maker doesn't provide any special information. I'm guessing someone misunderstood something like Level II quotes (https://www.investopedia.com/articles/trading/06/level2quote...) as being information that hedge funds / investment banks / pros have that retail traders don't... but it's just semi-public information that anyone can pay for access to.

Jane Street also isn't doing pump and dumps, they're not in crypto discord channels hyping some coin or running bot farms of twitter accounts to talk up some stock.

They run several different types of trading that might interact with other people attempting pump & dumps though, which could impact in either direction- plausibly they might do a momentum trade that follows the direction of movement or they might recognize a price discrepancy happening and trade against it.

More accurately, they have complex models pulling in many, many signals to inform trading, and I'm being a bit reductionist to categorize it as these two things.

If it’s so ridiculous then why is this practice specifically forbidden on US regulated exchanges?