Beware
Renovaro BioSciences: A Worthless AI Shell Game With A Murderous Magician Past
(NASDAQ:RENB)
Renovaro is a biotech company with several preclinical drug candidates that is “committed to curing people with cancers and infectious diseases”. Weeks ago, it voted to merge with “AI Health” company GEDi Cube, giving the company a pro-forma fully diluted market cap of ~$567 million.
Current CEO Dr. Mark Dybul has a prestigious background (i) serving under Anthony Fauci at the National Institute of Health (NIH) (ii) as Executive Director of the Global Fund to Fight AIDS, Tuberculosis, and Malaria and (iii) as a tenured professor at Georgetown University.
Dybul has been involved with the company since 2017, before it went public. The company went public in early 2018 under a predecessor name, Enochian BioSciences. Dybul stepped into the CEO role in 2021, where he remains today.
Then known as Enochian, the company’s co-founder, “scientific founder”, “inventor”, and largest shareholder was an individual named Dr. Serhat Gumrukcu.
CEO Dybul praised Gumrukcu as a “rare genius”, saying he could be “the most impactful scientist in generations”. In a now-deleted company video, Dybul praised Gumrukcu’s “brilliance” and said he created “some of the most innovative approaches to HIV and oncology” that he knew of.
In May 2022, Gumrukcu, was charged by the Department of Justice over allegations that he conspired to hire a hitman to murder one of the victims of his many scams, a Vermont father of 6 who was taken from his home and executed in a snowbank.
A week after the charges, we published a report on the company titled “Miracle Cures and Murder For Hire: How A Spoon-Bending Turkish Magician Built A $600 Million Nasdaq-Listed Scam Based On A Lifetime Of Lies”, which largely profiled the now-imprisoned Gumrukcu.
In that report, we revealed Gumrukcu had faked his entire academic history, including forging his Russian medical degrees, and that he was a magician who had fled authorities in Turkey after being charged over allegations he faked being a doctor to steal money from a terminally ill cancer patient.
We also revealed that as a fugitive in the United States, Gumrukcu continued his crime spree, culminating in 14 felony charges in 2017 relating to the fraudulent sale of a home he didn’t own, writing bad checks, and defrauding a businessman through a fake energy trading deal.
The day after we published our report, CEO Dybul called it "misleading propaganda", claiming the magician's study results were still valid. "The science is the science, and the data are the data".
One month after the murder charges and our report, in July 2022, the company announced that Gumrukcu had faked clinical data relating to the company’s HBV and COVID-19 therapies. In October 2022, the company sued Gumrukcu, saying his conduct amounted to “brazen fraud”. The data was apparently not the data.
The company claimed it had “no reason” to doubt Gumrukcu’s data. Dybul later admitted he and the company knew Gumrukcu had been arrested on 14 felony counts relating to fraud at the time they began working with him, but kept working with him anyway.
Dybul ignored other obvious red flags including (i) in 2018 when the company’s CFO raised concerns of “serious financial improprieties” related to Gumrukcu (ii) when analysts in 2019 pointed out Gumrukcu’s suspicious medical credentials and criminal history and (iii) when Dybul was questioned in 2020 regarding a U.S. lawsuit alleging Gumrukcu practiced sham medicine on a terminally ill child and absconded with the parent’s $253,000.
Enochian Chairman Rene Sindlev also knew of and ignored Gumrukcu’s felony fraud charges and previously compared Gumrukcu to Leonardo Da Vinci and Albert Einstein. No board members or key executives resigned despite their inexcusable governance failures.
In late 2022, 6 months after the murder charges and 2 months after the company sued Gumrukcu for “brazen fraud”, the board of Renovaro elected to pay Dybul a $100,000 cash performance bonus on top of his $850,000 annual salary.
In March and April 2023, with Enochian almost out of cash and its stock near lows, Chairman Sindlev “conducted multiple calls and in-person meetings” with representatives of GEDi Cube, an entity which didn’t even exist at the time, later company disclosures revealed.
Also on the same day of the LOI and the name change, insiders including Chairman Sindlev quietly acquired millions of shares and warrants at effective prices ranging from $0.65 to $0.713 per share. Renovaro was trading at ~$0.65 at the time.
8 days later, Renovaro publicly announced the merger, calling GEDi Cube an “AI Company” using “cutting edge AI/machine learning technology”. Renovaro stock spiked 83% on the day, trading 78.5x its preceding 30-day average volume.
At the time of the announcement, GEDi Cube was a 2-month-old entity with “no operational history”, no product, no revenue and virtually no assets, according to disclosures made months later. GEDi basically consisted of only a term sheet to acquire an entity called Grace Systems, which it claimed had AI technology.
Grace Systems was a nearly insolvent tiny startup with no revenue and no commercial ready product after 10 years. It reported having $1,583 in cash on hand with ~$376,000 in liabilities at year end 2022. In April 2023, a Grace subsidiary filed for bankruptcy in the Netherlands.
GEDi needed €1 million to own 51% of Grace, implying a ~$2.2 million valuation for Grace. But the newly formed GEDi entity had next to nothing, so Renovaro lent it the needed $1.05 million to close the deal.
During merger negotiations to merge with Renovaro, GEDi then proposed a valuation of $225 million, which Renovaro rejected because GEDi “generated no revenue and had no projections”.
Renovaro and CEO Dybul then apparently negotiated against themselves, relying on a valuation opinion from an unnamed “AI expert” that ultimately resulted in Renovaro agreeing to pay $275 million in consideration for GEDi.
In brief, Renovaro and CEO Dybul lent GEDi the cash to close the Grace deal at a ~$2.2 million implied valuation, then turned around and merged with GEDi for $275 million in consideration after a hard-fought negotiation against himself.
Renovaro has repeatedly touted the importance of “visionary” former Intel/Nvidia executive Craig Rhodes as CEO of GEDi Cube. Shareholders likely voted for the deal in part due to Rhodes’ background. Rhodes confirmed to us in an email that he resigned in December 2023, a month before the vote, with no apparent disclosure of the key resignation to shareholders.
Renovaro also touted the appointment of Lester Russell, GEDi’s Chief Medical Officer, in an August 2023 press release. Russell also resigned in December 2023, also without disclosure to shareholders.
Renovaro and Dybul also repeatedly highlighted GEDi’s “strategic partnership” with Nvidia as a key justification for the merger. But the Nvidia “partnership” is a free program that over 17,000 companies have joined.
In the months leading up to the merger vote, Renovaro enlisted stock promoters, including one previously sanctioned by the SEC, to hype up the GEDi deal and pump shares to retail investors.
Dybul now claims that GEDi can provide a “multiplier effect” that will enhance Renovaro’s pipeline.
The company’s lead candidate remains Gumrukcu’s cancer therapy. Dybul still touts the jailed magician’s treatment, referring to it in January 2024 as “the holy grail of cancer research” and hopes to begin human trials later this year.
In an ironic twist, Gumrukcu’s husband sued Renovaro’s key executives and financiers in January 2024, alleging a range of securities law violations by Dybul and Sindlev, among others. The complaint alleges Sindlev purchased significant Renovaro stock while in possession of material nonpublic information relating to the merger.
The complaint also cites damning internal emails to allege Dybul is engaged in a “wink and nod scheme” with Renovaro’s financier Lincoln Park Capital, whereby Renovaro provides them with non-public information ahead of key company news to help Lincoln Park trade against Renovaro’s own shareholders.
Gumrukcu and his husband are a key holder of Renovaro, with ~19 million shares, or ~28% of the company. The family of Gumrukcu’s murder victim sued him for wrongful death and courts have frozen 12.8 million of his Enochian shares to cover potential damages.
Gumrukcu’s husband still owns 3.6 million free-trading shares which we expect will hit the market soon to cover litigation costs and defense costs for the upcoming murder conspiracy trial, slated for later this year.
In conclusion, if your company co-founder and key inventor turns out to be a con artist magician who (allegedly) murdered someone and faked his scientific data, you can’t just change your company name and pivot to AI and hope no one notices.
CEO Mark Dybul appears set on trying to run the same shameless scam with a new name. We think he is in a league of his own as far as poor judgment and governance and see inevitable massive downside in shares of Renovaro.
Initial Disclosure: After extensive research, we have taken a short position in shares of Renovaro Biosciences, Inc. (NASDAQ:RENB). This report represents our opinion, and we encourage every reader to do their own due diligence. Please see our full disclaimer at the bottom of the report.
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