Ye Shikai spoke with righteous indignation, not allowing anyone to question him. Illusion Fox certainly wasn't dead, but Ye Shikai did not reveal the truth for Nightmare's sake. Illusion Fox was his woman, and during the several confrontations with the Tomb Spirit Organization, Nightmare had been seriously injured but also made great contributions. Ye Shikai also had personal motives; if he revealed Illusion Fox, SAD would definitely capture her, and Nightmare would desperately protect her. In the end, the Tomb Spirit Organization would remain unscathed while SAD and Netherworld Palace would end up fighting each other.
Fortunately, their attention was mainly focused on Refining Mo, so there were no doubts about Ye Shikai's words.