A shareholder derivative lawsuit has been filed against current and former executives and board members of Luna Innovations Inc., a leading provider of fiber optic technology solutions, alleging the premature recognition of unearned revenue and misleading financial reporting.

Filed in the U.S. District Court for the Central District of California, the complaint by investor Soon Keai Jimmy Sim targets former CEO Scott A. Graeff, two former Chief Financial Officers, and seven current and former board members. The suit claims the leadership team was responsible for concealing the unreliability of Luna’s financial reporting by including revenues that had not yet been earned.

According to the complaint, the company’s public statements regarding its operations and outlook were “materially false and misleading and/or lacked a reasonable basis at all relevant times.” Sim alleges that the misreporting began as early as the first quarter of fiscal year 2022, and persisted through 2023, prompting multiple revisions to Luna’s financial disclosures.

In March 2024, Luna announced revisions to its Q2 and Q3 2023 earnings, followed by a failure to meet the deadline for its annual report. That same day, Luna’s stock plummeted from over $6 to approximately $4, marking a 36% decline.

Further turbulence followed in late March when CEO Graeff abruptly retired. In April 2024, the company revealed it had fallen out of compliance with Nasdaq listing standards due to the delayed filings. Shortly after, it disclosed the need to restate its entire 2022 fiscal year and Q1 2023, resulting in another stock drop from nearly $2.80 to under $2—a 28% loss.

Headquartered in Roanoke, Virginia, Luna Innovations serves the telecommunications and photonics industries with advanced fiber optic test, measurement, and control products.

The plaintiff is represented by Robert C. Moest of The Brown Law Firm PC. Legal counsel for the defendants has not yet been made publicly available.

The case is titled Sim v. Graeff et al., Case No. 2:25-cv-04629.