From the previously cited article -
If a short seller cannot borrow a share and deliver that share to the person who purchased the (short) share within the three days allowed for settlement of the trade, it becomes a fail–to–deliver and hence a counterfeit share; however the share is transacted by the exchanges and the DTC as if it were real. Regulation SHO, implemented in January 2005 by the SEC, was supposed to end wholesale fails–to–deliver, but all it really did was cause the industry to exploit other loopholes, of which there are plenty (see 2 and 3 below).
Also, we could be watching grandfathered in "air shares" being passed around to cause the illusion of selling. If the shares are being "borrowed" from one air share account and sold to another, nothing is really happening but marks on the chart.