Being requested to gut 401k to get approval for short sale

So the story goes:
Lost my high tech job -
Was unable to continue paying for my house.
Put house on market knowing it was going to be a short sale.
Got two great agents. One knows and has had success doing short sales.
Gave Wells Fargo all my finical information including 401k's and IRA's (mistake in retrospect)

Received a solid offer to buy the unit. Wells Fargo did an appraisal. All looked
good. The holder of the first, Wells Fargo, approved the short sale. The holder of the
second, also Wells, has indicated that I must give them $50,000 from my 401k.

Mail from one of my real estate agents:
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I have not heard anything as of yet. It's not the first lender we are having issues with, it is the second lender. Our negotiators name is Jason xxx – 1-866-970-7821. I spoke to him on Thursday of last week, he was asking for an additional $50,000.00. We went over you file in detail and he keeps going back to your 401k balance even though he knows that you can not take a second loan out.
 
So keep your fingers crossed.
 
Thanks,

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I will not give them my 401k. I assume Wells even seeking this money is outside the tax law for 401ks.

To have this to do over I would only share data that can be found in open databases. Not a word about 401ks or IRAs, or any other monies that are invisible to them.

Even OJ Simpson got to keep his retirement monies (401k and the such).