US court forbids Byju’s from using $533 million

MUMBAI: In yet another major setback for troubled edtech startup Byju’s, a US bankruptcy court has passed an order in favour of the company’s term loan lenders, disabling the firm from transferring or using $533 million received as part of loan proceeds, essentially freezing the assets.

The loan amount which has been at the centre of dispute between Byju’s and its lenders has been transferred from an obscure hedge fund Camshaft Capital where it was previously held to an unnamed offshore trust, the group of lenders said in a statement on Friday.

The court has asked founder and group CEO Byju Raveendran and wife Divya Gokulnath to comply with the ruling. It has also ordered the arrest of William Morton, founder of Camshaft Capital Fund following his repeated refusal to appear in the court and provide any information regarding the transfers of $533 million and the current status, location of the funds. “The fact that the parent company (Think & Learn) is attempting to hide where the assets are is huge. It shows that they are engaged in what appears to be a potential fraud,” the court observed in its ruling.

Byju’s had recently said that the $533 million has been parked with a non-US subsidiary of the firm but did not disclose any additional details.

“This ruling confirms that Byju Raveendran himself is acting in concert with, among others, his brother Riju, his wife Divya and fugitive William Morton, and that these individuals are continuing to intentionally defraud Byju’s lenders. The court-ordered freezing of assets is an important step towards recovering the missing $533 million, and we will take all necessary legal actions to recover what we are rightfully owed,” the lenders said in a statement.

Morton fled the country (US) ahead of the hearing, according to the lenders. “Byju is not the victim he purports to be, but rather the architect of a scheme that has vaporised tens of billions of dollars in value in what was once a great Indian company,” the lenders said adding that Raveendran should accept the will of the company’s shareholders and immediately step down as the CEO and director to prevent further harm to the firm’s employees and “India’s credibility among the global investment community.”

In a statement, Byju’s said that the court order merely maintains “status quo” because the company has always maintained that the said funds are parked in one of its subsidiaries. “In fact, the court denied the primary relief requested—that a mandatory injunction be granted depositing the monies into court….it is now clear that this so-called adhoc group is working in cohort with certain large investors of Byju’s to exploit the situation and make windfall gains,” the startup said.

In 2021, Byju’s had set up a US-based entity Byju’s Alpha to receive the loan proceeds. Byju’s Alpha had initially appointed Camshaft to manage the funds. In early 2023, the funds were transferred to the startup’s another US subsidiary Inspilearn from where they have now been moved to what Byju’s claims to be its non-US subsidiary.

Last year, a US Court had allowed removal of Riju Ravindran as the sole director of Byju’s Alpha and replacing him with a representative of the lenders, placing the unit under their control. “Mr. Ravindran…..either was being untruthful or he’s the most incompetent officer or director of a company in Delaware history,” the bankruptcy court said in the hearing.