I don't know what "they" are saying, but what I am saying is that yes, the ref incorrectly raised his flag indicating a player had gone into touch. I am of the opinion that he did this as a reaction to thinking he saw a knock on.
This was clearly an incorrect decision, as firstly its debatable that it was a knock on, but mostly raising your flag is only to be used to indicate the ball or a players going into touch.
Despite it being clearly incorrect, the signal was still made. With the signal made, the ref must stop play as per Section 16.10
Once play is stopped, the ref would consult with the touch judge who would explain he raised his flag in error, and the ref would then rule play to restart with a scrum to the sharks.
The funny thing is that even if all of the above had gone down like it should, the likelihood is the blow up today would still be happening by much of the media since it was still a silly error by the touchy judge. The NRL would at least have been justified in the punishment they've winded up dishing out though.