While the number might be exagerated, the loss is still at least above 10 billions dollars
and Melvin something got a 2 billions emergency investing/bailout from a third party
so there is an awful lot of money currently involved.
Because the Hedge Funds are legally forced to give back the Gamestop stocks they borrowed but can't buy enough because other people have them,
the price of those stocks will go up and theorically it can go up infinitely
hence the joke about the 70 billion loss.
Some go as far as saying that the whole situation could crash the stock market because if it go high enough,
there's not enough money in the system to pay back the borrowed stocks.

No, that's the big joke here. They didn't bet that much.

Because these are shorts the risk is not limited and can become way more than they signed up for, they had no reason to expect to lose this much.