U.S. Bankruptcy Court Issues Ruling in Favor of BYJU?s Term Loan Lenders

15.03.2024 - 08:05:29

Business Wire India

Order Prohibits Further Movement or Use of $533 Million Rightfully and Contractually Owed to Lenders

Byju Raveendran and Divya Gokulnath Found to be Working in Concert With Defendants and Must Comply With Order

Warrant Issued for Arrest of Camshaft Capital Founder William Morton Who Fled Country Ahead of Hearing

The steering committee of the ad hoc group of term loan lenders (the “SteerCo”) of BYJU’s $1.2 billion term loan today announced that the Honorable Judge John T. Dorsey of the United States Bankruptcy Court for the District of Delaware (the “Court”) issued an order granting a preliminary injunction (the “Order”) in favor of BYJU’s Alpha, Inc. against Riju Ravindran, Inspilearn LLC, and Camshaft Capital Fund, LP and its affiliates (the “Defendants”). 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.

Pursuant to the Order, Byju, Divya, and the Defendants are prohibited from further transferring or using any of the $533 million in loan proceeds previously held by Camshaft Capital Fund, LP and subsequently transferred to an unnamed, unknown offshore trust.

In making its ruling, the Court confirmed that the transfer of funds from BYJU’s Alpha, and their continued concealment, likely constitutes a fraudulent conveyance. Relevant commentary from the Judge 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.”
“Mr. Ravindran…either was being untruthful or he's the most incompetent officer or director of a company in Delaware history.”
“I'm still very upset about the fact that [the Defendants] are obfuscating where this money is. And they are trying every trick in the book to be able to say, ‘we don't know, this guy doesn’t know, that guy doesn’t know, we don’t know where it is, we can’t tell you,’ and I'm tired of it.”

Additionally, the Court ordered the arrest of William Morton, the founder of Camshaft Capital Fund, LP, following his repeated refusal to appear in court and provide any of the requested information regarding the transfers of the $533 million in loan proceeds and the current status and location of the funds. Morton was also ordered to pay a fine of $10,000 per day until he complies with the Court’s Order.

In connection with the Order, the SteerCo issued the following statement:

“The significance of the Court’s ruling for all aggrieved parties owed money by BYJU’s cannot be overstated. 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.

“There should be no doubt that Byju is not the victim he purports to be, but rather the architect of a scheme that has vaporized tens of billions of dollars in value in what was once a great Indian company. We call on Byju to accept the will of Think & Learn’s shareholders and immediately step down as CEO and director to prevent further harm to the company’s employees, students and their families, and India’s credibility among the global investment community.”

Background

In 2021, BYJU’s Alpha, Inc. was established as a U.S. subsidiary of BYJU’s to receive proceeds of the term loan. In 2022, BYJU’s Alpha, under the control of Riju Ravindran (and prior to his removal as sole director of BYJU’s Alpha on March 3, 2023), transferred $533 million in loan proceeds to Camshaft Capital Fund, LP, an obscure, nascent hedge fund founded by William Morton. In March 2023, BYJU’s Alpha’s LP interest in Camshaft Capital Fund was transferred by Riju to Inspilearn LLC, and then again transferred to, and then redeemed by, a still undisclosed entity in February 2024. To date, and in defiance of a Court order, neither the Defendants nor Byju Raveendran and Divya Gokulnath have provided any specific information on the status of such funds to the lenders nor the new director of BYJU’s Alpha.