Though they were not borrowed from real shares, they do still exist, in the sense that the shares appear in shareholders brokerage accounts and have been paid for (with REAL money) by unsuspecting shareholders. So they must be covered at some point when it becomes not worth it to the MM's to hold them any more, unless they want to expose themselves to lawsuits (for not giving shareholders real shares)and other penalites from the SEC and other organizations if they're naked shorting is exposed.
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