[PGR88]

The hedge funds not only sold stock they didn’t have (Naked Short Selling, which is illegal, at least when mere mortals do it), but 40% more than exists.

I will defer to others, but I don’t believe this is illegal. This is done via derivatives. Speculators may buy puts (the right to sell at price), or sell uncovered calls.

The notional stock volume of these derivatives could be many times the outstanding float. In a normal market, these get “unwound” as options approach their expiration dates as traders balance positions, but in a very bizarre, illiquid market, like we have now, these turn into time bombs waiting to explode

[Governor Dinwiddie]

It's what they did in Mel Brooks's comedy The Producers (1967). They sold more shares than existed in a Broadway play. When the show Springtime for Hitler turned into a hit (instead of the expected failure) they were screwed. They couldn't pay off the investors.

[pierrem15]

This could be why the big boys are trying to stop trading: it could be that the clearing firms will have to take it in the shorts to clear the options.

[riverdawg]

“I will defer to others, but I don’t believe this [naked short selling] is illegal.”

You are correct. Here is what the SEC has to say:

https://www.sec.gov/investor/pubs/regsho.htm