Dickinson Wright and Fox Rothschild Join Forces to File Lawsuit Against ‘John Doe’ ‘Naked’ Short-Sellers of Lunai Common Stock
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On Tuesday, May 12, 2026, national law firms Dickinson Wright and Fox Rothschild joined forces to file a lawsuit on behalf of their firms’ client, Lunai Bioworks, Inc. (Nasdaq: LNAI) (Lunai), alleging securities fraud (stock manipulation) and intentional tort against “John Doe” “naked” short sellers of Lunai common stock on the Nasdaq Stock Market. The Complaint alleges that the short sellers engaged in the unlawful practice of “naked short selling” in a coordinated and systematic scheme to cause substantial harm to the company and its shareholders – highlighting deceptive devices they employed to violate federal laws and regulations and avoid detection by regulators. The lawsuit, filed in federal court in Delaware, seeks unspecified compensatory and special damages and other relief.
The Complaint lays out failures to deliver shares in violation of SEC Regulations, specifically Regulation SHO, reaching as high as 234.6 times the maximum baseline daily failure to deliver rate, including in one period when the failure to deliver reached 81.6% of the total outstanding shares of Lunai. The Complaint also highlighted various dates on which the naked short selling resulted in trading multiples of shares more than the company has outstanding. Two of the six specific examples included trading of 554,032,865 shares of Lunai on March 17, 2026, representing 15.3 times Lunai’s total outstanding shares. As recently as one week ago, on May 4, 2026, 100,392,900 shares of Lunai traded, representing 2.8 times Lunai’s total outstanding shares. The Complaint alleges that it was impossible for lawful short sales of such quantity of shares to have occurred those and other dates because that number of shares did not exist to be sold. Throughout this period, the number of Lunai shares available to be traded without even accounting for whether certain shares even could be loaned for shorting, was approximately 26 million shares. The Complaint set forth these, among other fraudulent activity, as securities fraud.
The Complaint opens with a quote from almost 20 years ago from then SEC Chairman Christopher Cox that the “SEC has made plain that we have zero tolerance for naked short selling….” Drawing on former Chairman Cox’s comment, co-lead counsel, Jacob Frenkel, Securities Enforcement Practice Chair at Dickinson Wright, stated: “The abusive, fraudulent and manipulative practice of ‘naked’ short selling causes real market harm, particularly to dynamic micro and mid-cap entrepreneurial public companies.” Frenkel added that “what happened to Lunai’s stock is a perfect example of insufficient enforcement of helpful regulations, such as Reg SHO, that are designed to protect companies, their shareholders and the market from such pervasive short-side fraudulent activity. Market integrity depends on meaningful enforcement, not rhetoric, and I applaud Lunai for initiating this lawsuit to protect the company and its shareholders.”
Co-lead counsel, Sidney Liebesman, Managing Partner of Fox Rothschild’s Delaware office, added: “This is precisely the type of securities fraud that the SEC has committed to eliminating.” Liebesman added that “the data tell a stark story – coordinated volume spikes, synchronized failure to deliver clusters, and exploitation of regulatory thresholds that are inconsistent with legitimate market activity. Lunai’s stock price declined from $1.17 to $0.93 in just two days following the announcement of breakthrough cancer research—a 20.6% drop that defies market logic and signals intentional manipulation.”
Lunai, as set forth in the lawsuit, is an AI-driven platform for precision medicine that identifies targets for new therapeutics and biodefense countermeasures. The company also has developed a cancer immunotherapy for solid tumors. The Complaint tells the company’s story for 2025 to the present -- referencing an April 2025 strategic merger, a May 2025 launch of an AI-powered precision neurology platform, a November 2025 announcement of the company’s next-generation dendritic cell immunotherapy having achieved complete regression of both primary and metastatic pancreatic tumors in preclinical humanized mouse models to mark a potential treatment, a March 2026 national initiative that uses artificial intelligence and cross-sector collaboration to accelerate the discovery and development of chemical countermeasures for emerging threats, an April 2026 deployment of an AI-powered platform for chemical threat assessment, and May 2026 intellectual property acquisitions that expanded Lunai’s central nervous system platform. Frenkel added that “companies achieving such meaningful business successes should not be subject to fraudulent, manipulative, unlawful and conspiratorial conduct that depresses a company’s stock price despite compelling positive news.” The Complaint seeks compensatory damages, which could multiply if Lunai amends the Complaint to assert civil RICO claims.
“Naked” short selling is illegal but remains a pervasive trading practice that often goes undetected. The SEC has conveyed in the past its belief that “naked” short selling undercuts the stability of financial institutions and undermines investor confidence in U.S. markets. The SEC also has stated that this practice “disrupt[s] the functioning of the securities markets that could threaten fair and orderly markets.” In recent years, both the SEC and Department of Justice have brought securities fraud cases charging “short and distort” schemes and fraudulent “naked” shorting. Liebesman added that “civil cases, such as this which we are bringing on behalf of Lunai, offer another path for aggrieved companies to pursue aggressively through our judicial system those who intentionally and fraudulently harm companies on our markets through naked short selling schemes.”
The complaint asserts three counts: (1) securities fraud under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; (2) market manipulation under Section 9(a) of the Exchange Act; and (3) the intentional tort of wire fraud under 18 U.S.C. § 1343. Lunai seeks compensatory and special damages, injunctive relief, prejudgment and post-judgment interest, and recovery of costs and reasonable attorneys' fees. The defendants are identified in the complaint as Does 1-50, Roe Corporations 1-50, and XYZ LLCs 1-50, pending discovery that will reveal their true identities. Dickinson Wright and Fox Rothschild intend to pursue expedited discovery to identify the defendants and seek emergency injunctive relief to halt the ongoing manipulative trading.
The Complaint, filed as Lunai Bioworks, Inc. v. Does 1-50, Roe Corporations 1-50, and XYZ LLCs 1-50, is on file in the United States District Court for the District of Columbia. Jacob Frenkel (Dickinson Wright, Washington, D.C.), and Sidney Liebesman (Fox Rothschild, Wilmington, Delaware) are co-lead counsel to Lunai, and Brian Yu (Dickinson Wright, Washington, D.C.) also is litigation counsel to Lunai.
The Complaint lays out failures to deliver shares in violation of SEC Regulations, specifically Regulation SHO, reaching as high as 234.6 times the maximum baseline daily failure to deliver rate, including in one period when the failure to deliver reached 81.6% of the total outstanding shares of Lunai. The Complaint also highlighted various dates on which the naked short selling resulted in trading multiples of shares more than the company has outstanding. Two of the six specific examples included trading of 554,032,865 shares of Lunai on March 17, 2026, representing 15.3 times Lunai’s total outstanding shares. As recently as one week ago, on May 4, 2026, 100,392,900 shares of Lunai traded, representing 2.8 times Lunai’s total outstanding shares. The Complaint alleges that it was impossible for lawful short sales of such quantity of shares to have occurred those and other dates because that number of shares did not exist to be sold. Throughout this period, the number of Lunai shares available to be traded without even accounting for whether certain shares even could be loaned for shorting, was approximately 26 million shares. The Complaint set forth these, among other fraudulent activity, as securities fraud.
The Complaint opens with a quote from almost 20 years ago from then SEC Chairman Christopher Cox that the “SEC has made plain that we have zero tolerance for naked short selling….” Drawing on former Chairman Cox’s comment, co-lead counsel, Jacob Frenkel, Securities Enforcement Practice Chair at Dickinson Wright, stated: “The abusive, fraudulent and manipulative practice of ‘naked’ short selling causes real market harm, particularly to dynamic micro and mid-cap entrepreneurial public companies.” Frenkel added that “what happened to Lunai’s stock is a perfect example of insufficient enforcement of helpful regulations, such as Reg SHO, that are designed to protect companies, their shareholders and the market from such pervasive short-side fraudulent activity. Market integrity depends on meaningful enforcement, not rhetoric, and I applaud Lunai for initiating this lawsuit to protect the company and its shareholders.”
Co-lead counsel, Sidney Liebesman, Managing Partner of Fox Rothschild’s Delaware office, added: “This is precisely the type of securities fraud that the SEC has committed to eliminating.” Liebesman added that “the data tell a stark story – coordinated volume spikes, synchronized failure to deliver clusters, and exploitation of regulatory thresholds that are inconsistent with legitimate market activity. Lunai’s stock price declined from $1.17 to $0.93 in just two days following the announcement of breakthrough cancer research—a 20.6% drop that defies market logic and signals intentional manipulation.”
Lunai, as set forth in the lawsuit, is an AI-driven platform for precision medicine that identifies targets for new therapeutics and biodefense countermeasures. The company also has developed a cancer immunotherapy for solid tumors. The Complaint tells the company’s story for 2025 to the present -- referencing an April 2025 strategic merger, a May 2025 launch of an AI-powered precision neurology platform, a November 2025 announcement of the company’s next-generation dendritic cell immunotherapy having achieved complete regression of both primary and metastatic pancreatic tumors in preclinical humanized mouse models to mark a potential treatment, a March 2026 national initiative that uses artificial intelligence and cross-sector collaboration to accelerate the discovery and development of chemical countermeasures for emerging threats, an April 2026 deployment of an AI-powered platform for chemical threat assessment, and May 2026 intellectual property acquisitions that expanded Lunai’s central nervous system platform. Frenkel added that “companies achieving such meaningful business successes should not be subject to fraudulent, manipulative, unlawful and conspiratorial conduct that depresses a company’s stock price despite compelling positive news.” The Complaint seeks compensatory damages, which could multiply if Lunai amends the Complaint to assert civil RICO claims.
“Naked” short selling is illegal but remains a pervasive trading practice that often goes undetected. The SEC has conveyed in the past its belief that “naked” short selling undercuts the stability of financial institutions and undermines investor confidence in U.S. markets. The SEC also has stated that this practice “disrupt[s] the functioning of the securities markets that could threaten fair and orderly markets.” In recent years, both the SEC and Department of Justice have brought securities fraud cases charging “short and distort” schemes and fraudulent “naked” shorting. Liebesman added that “civil cases, such as this which we are bringing on behalf of Lunai, offer another path for aggrieved companies to pursue aggressively through our judicial system those who intentionally and fraudulently harm companies on our markets through naked short selling schemes.”
The complaint asserts three counts: (1) securities fraud under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; (2) market manipulation under Section 9(a) of the Exchange Act; and (3) the intentional tort of wire fraud under 18 U.S.C. § 1343. Lunai seeks compensatory and special damages, injunctive relief, prejudgment and post-judgment interest, and recovery of costs and reasonable attorneys' fees. The defendants are identified in the complaint as Does 1-50, Roe Corporations 1-50, and XYZ LLCs 1-50, pending discovery that will reveal their true identities. Dickinson Wright and Fox Rothschild intend to pursue expedited discovery to identify the defendants and seek emergency injunctive relief to halt the ongoing manipulative trading.
The Complaint, filed as Lunai Bioworks, Inc. v. Does 1-50, Roe Corporations 1-50, and XYZ LLCs 1-50, is on file in the United States District Court for the District of Columbia. Jacob Frenkel (Dickinson Wright, Washington, D.C.), and Sidney Liebesman (Fox Rothschild, Wilmington, Delaware) are co-lead counsel to Lunai, and Brian Yu (Dickinson Wright, Washington, D.C.) also is litigation counsel to Lunai.
