Naked short selling is illegal in the U.S. and many other jurisdictions. It's risky and can lead to: Unlimited losses, Market manipulation, Transparency and fraud, and Financial risk. The SEC has been investigating potential manipulation by short sellers and hedge funds since at least 2021. For example, in 2023, the SEC charged two college professors with naked short selling, and they agreed to cease and desist from committing or causing such violations. The SEC seeks permanent injunctive relief, disgorgement of ill-gotten gains plus prejudgment interest, and civil penalties.