Citadel Securities is not Citadel Investments. This is important, because they operate on different sides of this: Citadel Securities is the market maker that is interested in Robinhood's flow. Citadel Investments is the hedge fund that bailed out Melvin. Now, whether it's good that they're connected, and up to what extent they should be allowed to is an important question.

Even if there had been some kind of illegal collusion, it doesn't seem likely that stopping trading would have helped Melvin to cover their short position, which they ended up doing.

There is probably no conspiracy here.