Lunai Bioworks, Inc. (NASDAQ: LNAI), an AI-driven precision medicine platform company, has filed a federal securities fraud lawsuit in Delaware alleging that unidentified naked short sellers engaged in a coordinated scheme to manipulate its common stock. The company, represented by national law firms Dickinson Wright and Fox Rothschild, claims repeated violations of SEC Regulation SHO, including extreme failures to deliver shares.
According to the complaint, failures to deliver reached as high as 234.6 times the maximum baseline daily rate, and at times represented 81.6% of the company’s total outstanding shares. The lawsuit also highlights trading activity that allegedly exceeded Lunai’s available share count, including more than 554 million shares traded on March 17, 2026, which is 15.3 times the company’s outstanding shares, and more than 100 million shares traded on May 4, 2026. The full press release is available at https://ibn.fm/XFOLP.
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. This legal action underscores the growing concern among small-cap companies about naked short selling, a practice where sellers fail to borrow shares before selling them short, potentially driving down stock prices artificially.
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. Lunai also pursues federal government contracts in support of national security and biodefense applications through its AI platform.
The implications of this lawsuit are significant for investors and the broader market. If successful, the case could set a precedent for holding anonymous short sellers accountable for market manipulation, potentially curbing abusive short-selling practices that harm small public companies. It also highlights the challenges companies face in combating illegal trading activities that can distort market prices and erode shareholder value.
Dickinson Wright and Fox Rothschild, both experienced in securities litigation, are co-lead counsel. Fox Rothschild LLP has approximately 1000 attorneys in 30 offices across the U.S., while Dickinson Wright has more than 500 attorneys across 23 offices in the U.S. and Canada. Their involvement signals the seriousness of the allegations and the legal resources being deployed to pursue the case.
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