Key Takeaways:
Lunai Bioworks named 10 defendants in an amended complaint alleging naked short selling that generated 29.6 million failed-to-deliver shares.
"The magnitude of this fraud is staggering – investors have lost real money, and it now is time for the fraudulent naked short sellers to be held responsible," Jacob Frenkel, co-lead counsel and chair of the Securities Enforcement and Government Investigations Practice at Dickinson Wright PLLC, said.
The complaint, filed in the U.S. District Court for the District of Delaware, alleges defendants sold short Lunai shares without borrowing or arranging to borrow the underlying securities as required under Regulation SHO during November 2025 through May 2026. On March 17, 2026, 554,032,865 shares of LNAI traded in a single session — 15.3 times the company's total issued shares — with zero shares available to borrow in the institutional lending market and an annualized borrow rate of 621.45 percent, up from 49.5 percent four days earlier. On November 5, 2025, the first day of the alleged scheme, trading volume reached 7.25 times the company's then issued shares.
The amended complaint asserts claims for securities fraud under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, market manipulation under Section 9(a), civil conspiracy to defraud predicated on wire fraud, civil racketeering under the federal RICO statute, common law fraud, and tortious interference with contract arising from the company's Nasdaq listing agreement. Lunai is seeking compensatory and special damages, treble damages under RICO, injunctive relief, prejudgment and post-judgment interest, costs, and attorneys' fees, and has demanded a jury trial.
"These filings mark real progress in our effort to hold accountable the parties who profited from illegally shorting our stock," David Weinstein, chief executive officer of Lunai Bioworks, said. "Our investigation identified failures to deliver equal to more than 80 percent of our outstanding shares and single day trading volumes many multiples of our entire share count."
The company said its investigation into trading activity is ongoing and expects to amend the complaint further to add additional participants as defendants. Lunai is represented by Fox Rothschild LLP as Delaware counsel and Dickinson Wright PLLC as principal corporate and litigation counsel. The claims remain to be proven in court.
Lunai Bioworks is an AI-driven precision medicine and biodefense company headquartered in Sacramento, California, with platforms including Augusta for precision neurology and BioSymetrics for biomedical data analysis. The company also pursues federal government contracts in support of national security and biodefense applications.
The lawsuit could increase volatility in LNAI shares as the market reacts to allegations of significant naked short selling. A successful RICO claim with treble damages could carry substantial financial implications for the named defendants, including the three FINRA-registered broker dealers. Investors will watch for further amendments to the complaint as the company's forensic analysis of trading data continues.
This article is for informational purposes only and does not constitute investment advice.
