Playing with only 13 men against 15 for a crucial five-minute period in the second half, the Tahs blew a golden opportunity to leapfrog the Melbourne Rebels and seize the Australian conference lead ahead of a two-game trip to South Africa.
The match was in the balance at 10-10 when Holloway was shown a red card for elbowing Sharks prop Thomas du Toit in the head in the 46th minute.
Australian referee Nic Berry also issued du Toit a yellow card for holding Holloway back but said Holloway had taken matters in his own hands with his unnecessary retaliation.
Holloway is the first Waratahs player to be sent off since Pat O’Connor earned a red card for headbutting b ack in 2011.
Five minutes later Dempsey was sent for a spell for a tip tackle on Sharks winger Sbusiso Nkosi and it didn’t take long for the tourists to punish the Waratahs.
Centre Andre Esterhuizen charged over two minutes later and Curwin Bosch’s conversion had the Sharks 17-10 ahead and with a one-man advantage for the best part of the last half hour.
There was no way back for the Tahs with Bosch putting the boot in with two further penalty goals to secure a priceless away win for the Durban outfit before Bernard Foley crossed for a consolation try after the fulltime siren.
But, such was their night, Foley missed the conversion attempt from virtually in front, denying the Waratahs an important bonus point.
Dejected captain Michael Hooper rued another match that got away.
“It was really hard,” Hooper said.
“The Sharks played a really good possession game there, kept putting us down there.
“They took some shots at goal which ate up time. We let the lead get too far out.”
The stinging defeat comes a week after the Waratahs downed the Rebels to breath new life in the fight for Australian conference honours and a guaranteed finals berth.
Daryl Gibson’s Jekyll and Hyde side had stressed all week about the importance of stringing back-to-back victories together.
Kurtley Beale ahead of Sharks match:
Sign up to our mailing list here and we’ll keep you up to the minute with weekly updates from the world of rugby.