Yes, "Failed to Deliver" shares are Naked Shorted shares. The Failure to Deliver the shares when requested is what makes them NAKED short shares. They do not get covered (delivered), thus the term "Naked", as in uncovered.
Regular shorted shares are shares that are LOCATED and BORROWED to sell short. Technically, the sells are supposed to be matched up to shares that get borrowed against, and the seller should be able to present documentation of their existence within three settlement days of selling the shares they do not actually own (legal shorting). But, if the original share owner decides they want those shares for some reason, (like to sell, to get a dividend, to vote, to exchange for new shares offered in an exchange agreement or merger agreement, etc.), those MMs have to give those shares back to the original owner, and then go out and cover their short position by finding other shares to borrow or just buy back shares to cover their short position.
However, the MMs do not like having to cover when the stock is going down, because they see more money-making potential every penny lower the stock goes; and they DESPISE covering when the stock is going up because they refuse to take a losing trade. So, the MMs have just decided to forget about tracking which shares they are borrowing, and ignore delivering the shares when required to deliver. They just short with no regard being paid as to whether there are shares available to borrow to cover their short position, Thus the NAKED SHORT position was created. They have no shares available in the market to cover their position so they just FAIL TO DELIVER those shares when the 3 day settlement day comes up, and then 10 days, then 20 days, then 50 days, on and on. Technically, they are selling shares that do not exist, and just create a counterfeiting paper trail that absolutely noone can make sense out of. And since noone tries (our good ol SEC at work) to track down the counterfeited shares logged in this paper maze, the crooks just keep selling these counterfeited shares in their NAKED SHORT positions, and stealing the equity from the companies from which legitimate investors are invested.
They continue this until they eventually overload the supply portion of the supply/demand equation until the company's shares become worth almost nothing, and then the companies cannot get decent funding to fund growth, and they go out of business. In essence, the shareholders and the company are just blantently stolen from, and the SEC turns a blind eye to it, day after day.
