It was an explosive allegation. Naked short sales are when you sell a stock you don't have. That's illegal most of the time, for obvious reasons. DiIorio found evidence that KCG had illegally conducted nearly two billion dollars' worth of them.

It was a bit of a mystery story, with two unanswered questions at the end: Was DiIorio right? And if so, why hadn't any regulatory authority done anything about it?

One regulatory authority finally has, and its action would seem to confirm DiIorio's suspicions.

The Financial Industry Regulatory Authority (Finra), a private self-regulatory organization, charged KCG on October 31 with thousands of violations over three years of Regulation SHO, which according to the Securities and Exchange Commission (SEC) "was established to address concerns regarding persistent failures to deliver and potentially abusive 'naked' short selling.

Finra further found that KCG "failed to establish and maintain a supervisory system" to comply with Regulation SHO going back to 2012, when the company was re-constituted through a merger.

"So Finra is admitting that KCG never had a system in place," DiIorio said in an emailed statement.