Those who pay attention to these kinds of things may have noted that in recent weeks there has been a rash of pump-and-dump scheme securities class action lawsuit filings. In the following guest post, Sarah Abrams, Head of Claims Baleen Specialty, a division of Bowhead Specialty, takes a look at these recent cases and identifies several key features the lawsuits have in common. I would like to thank Sarah for allowing me to publish her article as a guest post on this site. Here is Sarah’s article.
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Four securities class action filings from late 2025 and early 2026 suggest an emerging pump-and-dump litigation trend focused on thinly traded public companies and social-media-driven stock promotion. Across these cases, plaintiffs increasingly emphasize low-float capital structures as a central factor enabling alleged market manipulation.
The complaints filed against Charming Medical Limited (“Charming SCA”), PomDoctor, Ltd. (“PomDoctor SCA”), China Liberal Education Holdings Ltd. (“CLEU SCA”), and Picard Medical, Inc. (“Picard SCA”) reflect a spectrum of theories, from omission-based claims tied to IPO structure to allegations of affirmative issuer participation in promotional schemes. These cases, taken together, show that plaintiffs’ lawyers are reframing low public float, concentrated insider ownership, and social-media amplification as governance and capital-markets risks with potential D&O implications.
The discussion below examines the Charming, PomDoctor, CLEU, and Picard securities actions and considers D&O underwriting considerations for companies with low-float structures operating in a social-media-driven trading environment.
The Charming SCA
On December 19, 2025, a plaintiff shareholder filed the Charming securities class action in the Southern District of New York (SDNY) on behalf of investors who purchased Charming Medical Limited securities between October 21, 2025 (the IPO date), and November 12, 2025, the day trading was halted. The complaint asserts violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 against the issuer, its senior officers and directors, its IPO underwriter, its auditor, and its U.S. agent for service of process.
According to the Charming SCA, in the weeks following Charming’s IPO, the illicit social-media scheme caused the company’s share price to spike, during which time insiders dumped their shares. Plaintiffs allege that Charming’s low-float IPO structure, under which executives retained the vast majority of outstanding shares, amplified the effects of the alleged social-media-based stock promotion. The sharp increase in the share price, coupled with alleged insider selling, contributed to extreme volatility, prompting the SEC and Nasdaq to halt trading in Charming’s shares within weeks of the IPO.
Rather than alleging that Charming itself orchestrated the social-media promotion, the Charming SCA advances an omission-based theory focused on the company’s IPO disclosures. Plaintiffs contend that Charming failed to warn investors that its capital structure, specifically, a low public float coupled with concentrated insider ownership, created structural vulnerabilities that made the stock an attractive vehicle for a pump-and-dump scheme. Under this theory, the alleged fraud did not arise from misstatements about Charming’s business, but from the omission of material risks inherent in the IPO’s architecture.
According to the complaint, Charming offered approximately 1.6 million Class A shares to the public, representing roughly nine percent of total outstanding equity, while insiders retained control through super-voting Class B shares and offshore holding entities. Plaintiffs allege that this structure amplified the effects of third-party social-media promotion and enabled insiders or affiliates to sell into an inflated market, contributing to extreme volatility and a trading halt imposed by the SEC and Nasdaq in November 2025.
The PomDoctor SCA
On February 5, 2026, a plaintiff shareholder filed a securities class action in the Southern District of New York against PomDoctor Ltd. on behalf of investors who purchased the company’s shares between its October 2025 IPO and a December 2025 trading collapse. The complaint asserts claims under Sections 10(b) and 20(a) of the Exchange Act against the issuer, its senior executives, its IPO underwriter, its auditor, and its U.S. agent for service of process.
PomDoctor’s IPO allegedly featured an exceptionally thin public float. According to the complaint, the offering consisted of approximately 833,000 publicly traded shares, representing roughly four percent of total outstanding equity following the IPO, while insiders retained effective control through super-voting Class B shares and offshore holding entities. Plaintiffs allege that this structure rendered the stock highly susceptible to manipulation, as relatively modest trading activity could produce outsized price movements.
According to the complaint, impersonators posing as financial advisors used Facebook and Instagram advertisements to funnel retail investors into private messaging groups on platforms such as WhatsApp, where participants were instructed to purchase and hold PomDoctor shares at specific price points. Plaintiffs allege that these campaigns generated a rapid post-IPO price increase untethered to company-specific fundamentals. In December 2025, PomDoctor’s stock reportedly collapsed by approximately ninety percent in a single trading session. Plaintiffs contend that the sharp decline followed coordinated selling by insiders or affiliates into an artificially inflated market, a dynamic that the company’s thin public float allegedly made possible.
The CLEU SCA
On January 30, 2026, a plaintiff shareholder filed a securities class action against China Liberal Education Holdings, Ltd. (‘CLEU’), alleging that the company’s management actively collaborated with a criminal syndicate to exploit the company’s public listing through a coordinated stock manipulation scheme.
According to the complaint, as CLEU’s underlying business deteriorated, management allegedly sought to monetize the company’s Nasdaq listing by issuing massive quantities of shares through non-bona fide offerings and concealing those issuances from the market. The complaint further alleges that social-media platforms, including WhatsApp groups populated by impersonators posing as financial advisors, were used to induce retail investors to purchase CLEU shares at artificially inflated prices. While the market believed that only a limited number of shares were outstanding, the alleged conspirators purportedly sold hundreds of millions of shares into the inflated market.
The Picard Medical SCA
On February 2, 2026, a plaintiff shareholder filed a securities class action against Picard Medical, Inc. (‘Picard’), alleging that the company completed a Nasdaq IPO in September 2025 with approximately 5% of its total shares available to the public. In the weeks following the offering, Picard’s stock price rose sharply without corresponding company-specific news, before collapsing abruptly amid allegations of coordinated social-media promotion.
The Picard SCA emphasizes that by the time of its IPO, multiple similarly structured low-float issuers had already experienced extreme volatility and regulatory scrutiny following social-media-driven promotion campaigns. Against that backdrop, plaintiffs allege that Picard’s offering documents failed to disclose that its unusually small float and concentrated insider ownership materially heightened the risk of artificial price inflation unrelated to fundamentals.
Discussion
Viewed together, the securities actions filed against Charming, PomDoctor, China Liberal Education Holdings, and Picard Medical suggest that plaintiffs’ lawyers are increasingly recasting pump-and-dump risk as a governance and capital-markets issue, rather than merely a disclosure or communications failure. Across these cases, the focus shifts from what companies said to how their capital structures allegedly enabled manipulation.
The Charming SCA reflects the omission-based end of this spectrum, with plaintiffs alleging that the company failed to disclose how its low-float IPO created structural vulnerability to manipulation. The PomDoctor SCA moves further along the continuum, combining a similarly thin float with allegations of coordinated social-media promotion and insider or affiliate selling. While the CLEU SCA represents the most aggressive theory, asserting direct issuer participation in a manipulation scheme, the Picard SCA, like the complaint against Charming, centers on foreseeability tied to IPO design rather than affirmative hype.
Collectively, these cases treat thin public float, concentrated insider ownership, and limited trading liquidity as potentially material risk factors in a market environment where social-media-driven stock manipulation is well documented. Under this framing, potential exposure may extend beyond officers responsible for public disclosures to boards, IPO committees, underwriters, and auditors alleged to have enabled or failed to mitigate foreseeable structural risk.
The complaints also advance a common foreseeability argument. Historically, third-party stock manipulation has been viewed as an external criminal act outside an issuer’s disclosure obligations. The Charming, PomDoctor, CLEU, and Picard securities cases could challenge that assumption, asserting that where low-float structures resemble known manipulation targets, generic volatility disclosures may be insufficient and more tailored risk disclosure may be required.
As these cases progress, it will be interesting to see how courts, particularly in the Southern District of New York, square plaintiffs’ lawyers’ structural-risk theories with scienter requirements, given the apparent absence in several complaints of allegations that the issuer knew of, or had the intent to participate in, the alleged manipulation schemes. As a result, low-float IPOs and similarly structured public companies may warrant heightened underwriting scrutiny, including closer review of float size, lock-up terms, insider selling capacity, shareholder concentration, and relevant enforcement or trading-halt precedents.
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