It's actually quite clear. Much like printing money takes value away from savers, naked short selling takes value from existing stock holders.

  The lawsuit between Overstock and the banks concerned a phenomenon called 
  naked short-selling, a kind of high-finance counterfeiting that, especially 
  prior to the introduction of new regulations in 2008, short-sellers could 
  use to artificially depress the value of the stocks they’ve bet against.