Certainly, I can't vouch for the bank's decision. However, just like any seller, a bank can take a property off the market at any time. Since the bank had not yet accepted your offer, it is not bound to do anything.
If the bank had accepted your offer and then reneged, there would be recourse for you - however, based upon your question, it sounds like the bank was within its rights. This is very unfortunate for someone who is willing and able to make a purchase.
In general, short sells are full of delays and frustrations. Hopefully, your question will help educate others in your situation.