Italian luxury group Brunello Cucinelli saw its shares tumble 17% on Thursday following allegations from London-based short seller Morpheus Research that the company misled investors about its operations in Russia, according to a report by the Financial Times.

The sell-off wiped more than €1bn off the group’s market value.

Morpheus, which has taken a short position in Cucinelli stock, claimed that the brand continues to operate multiple Moscow stores selling high-end items priced in the thousands of euros, despite EU sanctions restricting luxury exports over €300. The firm’s findings were based on interviews with former employees, trade data analysis, and visits to the stores.

Cucinelli’s CEO Luca Lisandroni has maintained that the company’s Russian stores remain closed and that only one-to-one client services and permissible wholesale sales continue. A spokesperson noted that Russian revenue now accounts for just 2% of total group sales, down from €16m in 2021 to €5 in m2024. The company is reportedly considering legal action to protect its reputation.

The Morpheus report follows similar claims from hedge fund Pertento Partners earlier this year, which alleged that Cucinelli used Russian channels to sell current collections at prices above EU-sanction limits.