BENGALURU: A US Bankruptcy Court has prohibited transfer or use of $533 million, which is in a 100% non-US subsidiary of Byju’s. It ordered a preliminary injunction, thereby seeking to maintain the status quo. Both Byju’s and $1.2 billion Term Loan B (TLB) lenders are fighting a legal battle in US courts.
The steering committee of the ad hoc group of term loan lenders (the SteerCo) of Byju’s said the court also found that Byju Raveendran and Divya Gokulnath are working in concert with the defendants and ordered them to comply with its ruling.
The lenders quoted commentary from the Judge that included, “The fact that the parent company is attempting to hide where the assets are is huge. It shows that they are engaged in what appears to be a potential fraud.” According to them, $533 million rightfully and contractually owed to lenders, whereas, Byju’s says it has always maintained that the said funds are safely parked in one of its subsidiaries and, as per the order, it will rightfully remain there. The lenders also wanted Byju to step down as CEO and director.
Byju’s had taken a loan from certain US-based lenders in November 2021 and for that purpose an SPV named Byju’s Alpha was incorporated in Delaware.
Byju’s Alpha initially appointed Camshaft Capital Fund, founded by William Morton, to manage its funds. In early 2023, the funds were transferred from Byju’s Alpha to Inspilearn, another US-based fully owned subsidiary of Byju’s. Inspilearn, thereafter, transferred those funds from Camshaft to a non-US based fund.
Additionally, the court ordered the arrest of William Morton. In a statement, the SteerCo said, “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.
In connection with the order, Byju’s in a statement said, “We had also maintained consistently that the lenders last year were aware of the situation of the $500m in Byju’s Alpha. We are satisfied that this matter has been laid to rest.”
Byju’s added, “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.”
‘Funds parked in subsidy, will release as per order’
Steering committee of the ad hoc group of term loan lenders of Byju’s said the court also found Byju Raveendran and Divya Gokulnath are working in concert with the defendants and ordered them to comply with its ruling. As per them, $533 million owed to lenders, whereas Byju’s says it has maintained funds are parked in one of its subsidiaries and, as per the order, it will remain there.