Wow. That's weird. Like, weird in the sense that they've got something similar happening to a dude on Home&Away atm - I think it's his way of coping with the trauma from being beaten up by a bunch of kids. AGH! Sorry, I digress from the topic.
Have you talked to him about it, DT? I mean, is he religious or anything? Is everything okay at home? Do you know why he's depressed? Maybe if you get down to the roots of his depression, you can find a way to help him out. And just so you know, he's not depressed because of this Shane. He created this figure, right, which is pretty much screwing with his head and making him want to do really stupid and insane things that is destructive to himself and everyone around him? This thing stems from his depression. If he's religious at all, you might want to speak to him about mentioning it to his pastor (although, I'm quite biased about that since you actually can't trust people like that with everything anymore). If he's not, try to get him to speak to his parents about it. If he doesn't want to tell anyone else about this, then just make sure you're there for him when he needs you, and keep reiterating to him that he has to stop hurting himself and pull himself together (not exactly in those words, that's a bit harsh).
But yeah. Just be there for him as much as you can. I mean, really, keep a really close watch on him, and let him know that you're there for him. I mean, first cutting himself? Next step up is going to be murder/suicide. I know this. I have a 'Shade' as you refer to it, too. I call him Michellis. I pretty much went through the exact same stage as your friend is with depression and cutting myself, etc etc. Then I started having really disturbing visions of killing my kid, and killing myself, to the extremes that it scared me so much I didn't trust myself alone with my daughter. And it wasn't ME thinking these things but rather like these thoughts were being put in my head. It's hard to explain it. I was so terrified and confused and unhappy at one stage that I couldn't tell the difference between reality and my emotional distress, so much so that I started seeing things. Anyway, that's my sad little story, but I can relate to your friend. Just keep a really close eye on him and talk to him about why he's doing these things, why this Shane is telling him to do these things, and so on. If he starts cutting his wrists (you'll be able to tell because he'll either hide it under long sleeved shirts or wear bangles or something to cover it up), you need to take him by the arm, drag him to a trustworthy adult who is competent with dealing with troubled teenagers, and lay it all out on the table, and thank God that you caught him before he actually does commit suicide.
@meg: it's not schizophrenia.