The H-1B lottery this year was riddled with fraud - so much so that USCIS will be conducting a second lottery soon - but it appears that there was no reduction in the numbers despite layoffs in certain industries.

Where is there opportunity for fraud in the H-1B system? Fake / Shell companies sponsoring workers?

Calling it fraud is stupid. They deliberately reduced the work that is required, allowing people to file applications easily and cheaply. They deliberately allow people to file multiple applications, that I have not seen a single legitimate employee file. This is all deliberate, not a loophole or fraud.

Also, it is stupid to call H1B a high-skilled visa when you hand it out via lotteries. I wonder if people consider winning powerball as a skill?

But to answer your question, many people filed 10-20 applications each through fake companies to get H1B. The H1b acceptance rate was down to 13% and more than half the applications were filed by people with multiple applications.

Is submitting multiple applications illegal? I'd have to imagine that you would get caught for doing this once they see the same person in the system, especially if they approve the same person multiple times.

No, not illegal at all.

That's it and the reason a second lottery is being run.

Doesn't this essentially prove that these are mostly not high skill positions that can't be filled but are actually just a way to get high skill labor at below market rates?