You have to be a pretty big organisation and post a lot of collateral to borrow and sell stock. It's also assumed you'll sell it on exchange, if you do so you don't know the buyer though I guess you could arrange it? So a really sneaky player willing to sacrifice a lot of collateral could probably do it.
I think the main safety catch here is that if you hold a significant percentage of a company and you want those voting rights, talk to your broker to make sure its not lent without your knowledge...
I wonder if this has ever happened?
Edit:
I spent some time googling and found this:
https://www.quora.com/What-happens-to-a-short-seller-who-can...
It's quora but it seems pretty good. It does seem that if it's lent and not returned you get cash or wait for some to become available. Sucks if you wanted to vote the shares...
Isn't this also a loophole that can be used to "steal" stock from someone who otherwise doesn't want to sell: their share is loaned by their broker to B who sells it to you, and then you just refuse to sell it back to be returned, and some random middle man is on the hook and you've managed to purchase shares that weren't for sale?