- Byju’s was once India’s hottest startup, with a lineup of top global debt and equity investors.
- A judge ruled that Byju’s-related entities had fraudulently transferred over $500 million to a “sham” hedge fund.
- The money is still missing.
Call it the case of the vanishing half a billion dollars.
During the pandemic-era startup funding boom, the education technology company Byju’s raised money from some of the biggest names in global investing. At its peak, the Bengaluru-based company was valued at $22 billion, making it the most valuable startup in India. But last week, a US judge ruled that entities associated with Byju’s had fraudulently transferred over $500 million to a group the judge deemed a “sham.”
The summary judgment in Delaware bankruptcy court, released on Thursday, advances the lenders’ yearslong search for the missing money. Judge John T. Dorsey ruled against Riju Ravindran — a former Byju’s board member and the founder’s brother — and entities related to the company, including a hedge fund founded by a 23-year-old high school dropout.
Dorsey found the $533 million was fraudulently transferred to what he called a “high-risk and unproven hedge fund.” It had few other investors, a high fee structure, and, at one point, a Miami IHOP headquarters address with a non-working phone, per court documents. The ruling opens the door for damages — with a hearing about specifics still to be scheduled — and for the lenders to try to recover some of that money.
In November 2021, after equity fundraising from BlackRock, the Chan-Zuckerberg Initiative, and other power players, Byju’s set up a special financing vehicle with $1.2 billion from top private lenders, including Ares Management and HPS Investment Partners. Led by the media-hungry founder Byju Raveendran, Byju’s expanded quickly by snapping up other companies.
Months after the lenders’ money came in and without their knowledge, Ravindran transferred $533 million to a tiny hedge fund called Camshaft Capital, per Thursday’s summary judgement. The fund was run by a portfolio manager named William Morton, who the lenders said in a complaint had no investment experience. The lenders’ complaint said last year that Morton had recently bought three luxury cars: a 2023 Ferrari Roma, a 2020 Lamborghini Huracán EVO, and a 2014 Rolls-Royce Wraith.
Ravindran’s attorneys told the Delaware bankruptcy court that he moved the money to Camshaft because “Byju’s felt the need to protect the cash.” Ravindran said in sworn testimony that he had never heard of Camshaft before April 2022 and that he did no diligence prior to the transfers.
Dorsey wrote in the summary judgment that Camshaft should have spotted “numerous red flags” pointing to the transactions’ “fraudulent purpose.”
Camshaft then lent the money to a British company in a deal done without the lenders’ approval, wrote Dorsey. The lenders have yet to trace the money, despite extensive efforts detailed in court documents.
Last week’s lawsuit is just one part of Byju’s winding saga, which stretches across continents and involves more than a dozen lawsuits. While the level of funding Byju’s commanded during its heyday sets it apart from the ed-tech competition, the company is part of a wave of global startups that picked up significant funding during the pandemic. At the time, investors scrambled to back companies amid record low interest rates. Now, lower valuations in a much different market threaten those good-times investments.
The money is ‘someplace the Lenders will never find it’
After negotiations with Byju’s fell apart over missed interest payments and other issues, the lenders put the special financing vehicle through involuntary bankruptcy. They appointed Timothy Pohl, a restructuring veteran, to manage the company and unravel the key mystery: the money’s trail. But even after Pohl took over as the sole manager in March 2023, Ravindran continued to move money out, Dorsey wrote in Thursday’s summary judgement.
In May 2023, Raveendran told an advisor to the lenders that the money had gone “someplace the Lenders will never find it,” the advisor later wrote in a declaration.
So far, legal proceedings have offered few clues about the missing $533 million. Morton and his fund were held in contempt of court last year for failure to cooperate with discovery. He told The Wall Street Journal last spring that he had fled the US with no plans to return — and that Camshaft is not a sham.
Raveendran and Ravindran are last known to be living in Dubai. Ravindran was also held in contempt of court last year.
The lenders said in a statement on Friday that they see the ruling as a “significant step forward” in their recovery efforts.
“We are gratified the Court unequivocally recognized that Riju Ravindran, Camshaft, and BYJU’s together conducted a deliberate fraud on a global scale arising from the theft of $533 million,” the lenders said in the statement.
Byju’s is still operating, but the company faces significant turmoil beyond the US bankruptcy case. BlackRock and at least one other equity investor have written off the value of their investments. BlackRock and the Chan-Zuckerberg Initiative did not respond to Business Insider’s requests for comment, nor did Byju’s.
Lawyers for Morton and Ravindran did not respond to requests for comment, nor did Morton or Raveendran. Ravindran could not be located for comment.
Raveendran wrote on LinkedIn on Friday and again on Monday that he would rebuild the company.
“I will keep on keeping on. Till the wrongs are righted, and the mistakes are corrected,” he posted on Monday.
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