There are exemptions for market makers to naked short, and with the cooperation of market makers, shorty can conceal his position through the market makers. Somone posted a good link on here to an article a while back, "short selling, death spiral convertibles, and the profitability of stock manipulation". Good read, will give you a better idea of how naked shorting slips by, and since MM's allow shorty to do this, they themselves might have some trouble coming their way. Google the article.
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