Getting to the naked truth

"The Wolfsons’ alleged scheme involved a thicket of complex transactions, according to the SEC. One type of trade, a “reverse conversion”, involved taking out options that appeared to offset the short position, making naked shorting look like bona fide marketmaking. Another stock-and-option combination, the “reset”, created the illusion that trades had been settled by having an entity buy the same type and quantity of shares that had been sold short. But the shares were always sold back within days, often in trades between the brothers, which the SEC claims were “sham”. The reset trades meant they could roll over naked-short positions indefinitely."


A bit more complicated than I first thought but I think the above is what the SEC refers to as "cycling".