Lunai Bioworks Sues Alleged Naked Short Sellers for Securities Fraud

Lunai Bioworks, Inc. (NASDAQ: LNAI), an AI-driven precision medicine company, has taken legal action against alleged naked short sellers, filing a securities fraud lawsuit in Delaware federal court. The complaint, brought by national law firms Dickinson Wright and Fox Rothschild, accuses unidentified traders of orchestrating a coordinated scheme to manipulate trading in Lunai’s common stock, in violation of SEC Regulation SHO.

According to the lawsuit, failures to deliver shares reached as high as 234.6 times the maximum baseline daily rate, with periods where failures to deliver represented 81.6% of the company’s total outstanding shares. The complaint further alleges that trading activity exceeded Lunai’s available share count on multiple occasions, including more than 554 million shares traded on March 17, 2026—15.3 times the company’s outstanding shares—and over 100 million shares traded on May 4, 2026.

The lawsuit seeks compensatory and special damages, injunctive relief, and recovery of legal costs. Counsel indicated they intend to pursue expedited discovery to identify the unnamed defendants and seek emergency relief to halt any ongoing manipulative trading. The full press release is available at https://ibn.fm/XFOLP.

This legal action underscores the persistent problem of naked short selling, which involves selling shares that have not been affirmatively determined to exist, often leading to artificial downward pressure on a stock’s price. For small-cap companies like Lunai, such practices can be particularly damaging, potentially undermining investor confidence and impairing the company’s ability to raise capital.

Lunai Bioworks, headquartered in Sacramento, California, is an AI-driven platform for precision medicine that identifies targets for new therapeutics and biodefense countermeasures. The company has developed a cancer immunotherapy for solid tumors and proprietary technologies that transform complex biomedical data into predictive insights. Its platforms include Augusta, an AI-powered precision neurology platform, and a portfolio focused on central nervous system disorders. The company also pursues federal government contracts in support of national security and biodefense applications.

The involvement of prominent law firms adds weight to the case. Fox Rothschild LLP, with approximately 1000 attorneys in 30 offices across the U.S., has extensive experience representing issuers in federal court and before the SEC, as well as pursuing securities fraud claims against market manipulators. Dickinson Wright PLLC, with more than 500 attorneys across 23 offices in the U.S. and Canada, has a strong securities and capital markets practice, including securities fraud litigation and enforcement matters.

If successful, the lawsuit could set a precedent for other companies facing similar alleged manipulation, potentially leading to increased regulatory scrutiny and enforcement actions against naked short selling. The outcome may also influence how small-cap firms protect themselves against market abuse, highlighting the importance of legal recourse in maintaining market integrity.