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 defendants of orchestrating a coordinated scheme to manipulate trading in the company's common stock in violation of SEC Regulation SHO.
The lawsuit alleges that 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 Lunai's total outstanding shares. The complaint further claims that trading activity on certain days exceeded the company's available share count, including more than 554 million shares traded on March 17, 2026—representing 15.3 times the outstanding shares—and over 100 million shares traded on May 4, 2026.
Lunai is seeking compensatory and special damages, injunctive relief, and recovery of legal costs. Counsel for the company stated 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.
Naked short selling involves selling shares that have not been borrowed or confirmed as existing, which can artificially depress a stock's price. For a company like Lunai, which is developing innovative cancer immunotherapies and AI-powered platforms for precision medicine, such manipulation could undermine investor confidence and hamper its ability to raise capital for research and development.
Lunai Bioworks is a Delaware corporation headquartered in Sacramento, California. The company describes itself as an AI-driven platform for precision medicine that identifies targets for new therapeutics and biodefense countermeasures. It has developed a cancer immunotherapy for solid tumors and proprietary technologies that transform complex biomedical data into predictive insights. Lunai's 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 through its AI platform.
The legal team includes Jacob S. Frenkel, Chair of Dickinson Wright's Government Investigations and Securities Enforcement Practice, and Sidney S. Liebesman, Senior Litigation Partner at Fox Rothschild in Wilmington, Delaware. Dickinson Wright is a general practice business law firm with more than 500 attorneys across 23 offices in the U.S. and Canada. Fox Rothschild has approximately 1000 attorneys in 30 offices across major U.S. markets, with extensive experience in securities litigation.
This lawsuit highlights ongoing concerns about market manipulation in small-cap and micro-cap stocks. For business leaders and investors, the case underscores the importance of regulatory compliance and the potential legal recourse available when trading abuses are suspected. If successful, Lunai's action could deter future manipulative practices and reinforce the integrity of capital markets.
