He didn't sell in the "normal" way that most people think of when they hear the term "sell." He engaged in a (perfectly legitimate) technique known as short selling, in which he borrows shares from his broker and sells them immediately. He's betting that the price of the stock will drop so he can buy them back at a lower price to return the borrowed shares back to his broker. He gets to pocket the difference.
He had about $37,000 of cash in his account. Since he borrowed ~8400 shares and sold them immediately at $2/share, he got $16,800 in cash and owed his broker 8400 shares. So, his net purchasing power at the time of the short sale was $37,000 + $16,800 - 4800 shares * $2/share. As the price of the stock changes, his purchasing power will change according to this equation.
He's allowed to continue to borrow these 8400 shares as long as his purchasing power remains above 0. That is, the broker requires him to have enough cash on hand to buy back all of his borrowed shares at any given moment. If his purchasing power ever goes negative, he'll be subject to a margin call: the broker will make him either deposit cash into his account or close his positions (sell long positions or buy back short positions) until it's positive again.
The stock jumped up to $13.85 the next morning before the market opened (during "before-hours" trading). His purchasing power at that time was $37,000 + $16,800 - 8400 shares * $13.85/share = -$62,540. Since his purchasing power was negative, he was subject to a margin call. By the time he got out, he had to pay $17.50/share to buy back the 8400 shares that he borrowed, making his purchasing power -$101,600. This $101,600 was money that he borrowed from his broker to buy back the shares to fulfill his margin call.
His huge loss was from borrowing shares from his broker. Note that his maximum potential loss is unlimited, since there is no limit to how much a stock can grow. Evidently, he failed to grasp the most important concept of short selling, which is that he's borrowing stock from his broker and he's obligated to give that stock back whenever his broker wants, no matter what it costs him to fulfill that obligation.