Last week, the U.S. Bankruptcy Court for the District of Delaware delivered a significant verdict, delivering a summary judgment against Riju Ravindran, the brother of Byju’s CEO Byju Raveendran; Think & Learn, the parent company of Byju’s; and Camshaft Capital, a hedge fund. The court found them guilty of a “breach of fiduciary duty” and fraudulent transfer of a substantial amount of $533 million.
The Delaware Bankruptcy Court has ruled that multiple fund transfers from Byju’s Alpha, the U.S. subsidiary of Byju’s, were indeed actual fraudulent transfers and conversion.
Riju Ravindran, brother of Byju Raveendran and director of Byju’s Alpha, has been found by the court to have violated his fiduciary duties.
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The Lenders have welcomed the court’s ruling, stating that it’s a significant step forward in their efforts to recover the stolen funds. “We are gratified the Court unequivocally recognised that Riju Ravindran, Camshaft, and Byju’s together conducted a deliberate fraud on a global scale arising from the theft of $533 million. This is a significant step forward in the Lenders’ efforts to recover the stolen funds that are rightfully owed to them,” the Lenders said in a statement.
The court’s ruling was in response to a case filed in February last year by Byju’s lenders, represented by Glas Trust LLC. This case was related to a $1.2 billion term loan that Byju’s Alpha, a special purpose financial institution, had borrowed from Glas Trust in November 2021.
Byju’s Alpha failed to meet its loan obligations in March 2022, leading to it being placed under trusteeship in March 2023. The loan in question was a substantial $1.2 billion, provided by a consortium of 37 financial institutions.
The lenders have alleged that in 2022, Byju’s Alpha, which was under the control of the Raveendran family at the time, transferred a significant amount of $533 million in term loan proceeds to Camshaft Capital Fund. This fund is reportedly a sham hedge fund founded by William Morton.
According to the lenders, a series of complex transactions took place involving Byju’s Alpha’s limited partnership interest in Camshaft Capital Fund. “In March 2023, Byju’s Alpha’s limited partnership interest in Camshaft Capital Fund was transferred by Riju and Byju to Inspilearn LLC, and then again transferred to, and then redeemed by an offshore trust of Inspilearn in February 2024. Subsequently, there was yet another transfer to a still undisclosed entity,” they stated.
Byju’s Ordered to Return Ownership of Lucrative Education Apps Worth $1 Mn Monthly to U.S. Lenders
Speaking of the legal trauma for Byju’s in the United States, it is worth noting that back in November, a federal judge ruled that two lucrative education apps, which are part of the embattled Byju’s software empire, were improperly transferred and must be returned to a court-appointed bankruptcy trustee. The apps, previously secured by U.S. lenders, were allegedly transferred without authorization, prompting the judge’s decision to reclaim them as part of bankruptcy proceedings.
According to the trustee overseeing three of Byju’s U.S.-based units, a single rogue officer deceitfully manipulated tech giant Apple Inc. into altering the ownership and revenue stream of two highly profitable apps, which collectively generate approximately $1 million in monthly revenue.
During a virtual hearing on Tuesday, attorney Catherine Steege revealed that the two disputed apps enable parents to download educational materials for their children. The suspicious transfer occurred shortly after the trustee assumed control of Byju’s bankrupt U.S. units, specifically Epic! Creations, Neuron Fuel, and Tangible Play, sparking ongoing legal proceedings.
Following the federal judge’s appointment of trustee Claudia Springer to oversee Byju’s three U.S. units, unknown individuals directed by the India-based company have engaged in suspicious activities, attorney Catherine Steege alleged. These actions include misappropriating funds, transferring source code from Apple and Google-managed cloud systems, and altering the names of various online accounts, further complicating the already tumultuous bankruptcy proceedings.
Attorney Catherine Steege addressed U.S. Bankruptcy Judge John Dorsey in Wilmington, Delaware, condemning the actions of Byju’s affiliates. “These bad actors began a game of ‘catch me if you can’,” she said. Additionally, Steege noted that they are “trying to stay one step ahead of the trustee.”
Dorsey issued an order directing Apple to restore ownership of the disputed apps to Byju’s U.S. units. During the hearing, a lawyer representing the Indian firm that had improperly acquired ownership of the apps attempted to argue for a delay in the ruling, but ultimately, Judge Dorsey denied the request and proceeded with the order.
The ongoing dispute marks the latest escalation in the contentious relationship between Byju’s, formally known as Think & Learn Private Ltd., and its U.S.-based lenders. This development follows Byju’s default on a staggering debt of over $1.2 billion, prompting U.S. lenders to seize control of one of Byju’s shell companies and force three smaller U.S. subsidiaries into bankruptcy proceedings.
Byju’s representatives remained silent on the matter, failing to provide an immediate response to requests for comment. Court records reveal that Byju’s acquired the firms in question just a few years ago for a substantial $820 million. In an effort to repay Byju’s creditors, including the U.S. lenders, Springer is currently preparing to hold an auction for at least two of the units, aiming to generate much-needed funds.
Byju’s has been embroiled in a prolonged legal battle with lenders in the U.S. state and federal courts for over a year. Simultaneously, the company is facing insolvency proceedings in India, where court-appointed professional Pankaj Srivastava is working to liquidate assets to repay creditors. Srivastava has intervened in the U.S. court case, requesting that no action be taken regarding the three U.S. units, arguing that they are Byju’s assets and potentially crucial for settling debts with Indian creditors.
Judge Dorsey has dismissed Pankaj Srivastava’s requests, affirming that the three units, being U.S.-incorporated entities, fall under the jurisdiction of American bankruptcy courts. Meanwhile, Byju’s founder Byju Raveendran has vehemently denied any wrongdoing, defending his actions as necessary responses to the excessively aggressive strategies employed by lenders specializing in extracting funds from distressed companies.
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