[SkyMarshal]

The CEO of Overstock.com, Patrick Byrne, has been crusading against Naked Short Selling for most of the past decade, and with good reason. Among other socially undesirable uses, it is used by the mob to make fortunes by destroying small public companies. Everything you could possibly want to know about it here:

http://www.deepcapture.com/

Regular short selling is fine, and provides information, liquidity, a mechanism to enable Put options, and a much-needed reality check to sometimes irrationally exuberant markets.

The difference is that with regular short selling, the stocks you're borrowing to sell and then buy back later (hopefully at a lower price than you sold them) actually exist, and haven't also been simultaneously loaned to other short sellers.

Naked Short Selling is where some nefarious market participants exploit flaws in the DTCC to short sell many times more shares than are available for loan. This creates enormous, artificial downward pressure on the stock price of the company being naked shorted, which can destroy the company and turn its stock into penny stocks, while providing immense profits for the naked short sellers. It should be illegal everywhere.