Is it illegal for a MM to trade shares a company did not authorize for trading?

I find this very interesting. A certain stock I own did a reverse merger with another company in order to list on the Nasdaq.

They gave the old shareholders preferred shares and said they would be entitled to a dividend when the companies assets are sold off.

6 or so months later the preferred shares start trading OTC.

The CEO announces that they did not authorize these shares for trading…
The shares are still being traded.

What do you make of all this? What could a CEO do if somehow a MM sells shares they aren’t supposed to?

I’m not trying to spark any GameStop conspiracy theories, but it honestly feels like one! That seems very illegal and I’m surprised that the SEC would allow this to happen for so long.