Patrick M. Byrne was a great light years ago about naked short selling. He has since taken an indefinite med8ical leave of absence but not before he exposed that make short selling was rampant in markets.
He found one stockholder who had bought every last share of a small publicly traded company, owned 100% of the stock, and yet was shocked to learn the stock was selling off by what could only be naked short selling because he had not put up one share nor given anyone authority to sell his stock.
Yep, what you describe is utterly criminal and undermines the integrity of the system.
Naked short selling is illegal, unless you are a Market Maker meeting certain criteria, IIRC.
The person selling would not be able to deliver the securities when due, unless he somehow acquires them.