Really? So you say they were caught... What is the source of this nugget of nonsense?
The purpose of the DTC is to hold all paper stock certificates in one centralized location to facilitate electronic trading without the need to move actual certificates to trade shares. It has nothing to do with shorts... aside from proving that all the numbers add up and no naked shorts are out there!
(OS) - (restricted shares) - (what is held at DTC) = the unknown