Got a new car with trade in then loan got rejected... After dealership sold my trade in.?

Someone I know just recently bought a new car, trading in one of their own cars (15,000) as well. Long story short, he walked into the auto dealer with his OWN approved financing, however, the dealership told him they would beat him a loan and approved him for one of their lower interest rate loans, as well as taking his car. Fast forward three weeks later and now the bank has sent him a letter telling him the loan got rejected, but the dealership has already sold the traded in car. What are the legalities and complications regarding them selling the car? Also, why would they let him off the lot without fully knowing the loan went through let alone sell the trade in?