"But a share split would force the seller to either buy replacement shares (old or new to cover up his fraud) or the buyer would not receive the new shares."

Hi Edgy, are we sure this would in fact occur? I am not a proponent or reverse splits since they rarely seem to work and especially when the motive would produce uncertain results. I believe, as some others have indicated here, that the naked shorting will cease once overwhelming demand forces their hand, at which point the algorithms adjust and go long. This process usually takes time.