Byju Raveendran, the co-founder of ed-tech giant BYJU’s, was held guilty of contempt by the Delaware Bankruptcy Court in the US on Monday, July 7. The court also imposed civil sanctions worth USD 10,000 per day on him beginning July 1. Byju had maintained that the Delaware court does not have “personal jurisdiction over him.” The court, however, ruled otherwise, with new evidence filed by the lenders in the case.

This particular case, filed in April this year, is the first in the US against Byju in the alleged loan fraud matter. It also names his wife Divya Gokulnath and close associate Anita Kishore. Civil sanctions have already been applied to Riju Raveendran, brother of Byju in the primary case, with a fine of USD 10,000 per day imposed on him beginning from July 1.

Byju himself was supposed to attend an in-person hearing in Delaware on Monday, June 30, to respond to contempt charges and the imposition of civil sanctions against him. The charges came about after he missed several deadlines for filing documents related to the case. Byju had cited a travel ban in the UAE and related cases in Dubai and India and recused himself from the hearing. 

“Only on June 26, when faced with the impending show-cause hearing and imminent threat of sanctions, did Byju, who has been aware of the Debtor’s specific questions since April 11 and more generally aware of the information sought in these proceedings for more than two years, provide some semblance of written responses to the interrogatories. Worse still, as of the filing of this reply brief, Byju still has not produced a single document,” the opposing counsel told the court on June 28, referring to two court orders Byju ignored. 

However, the same day he was supposed to appear in Delaware in person, Byju was compelled to request the court to file an additional reply. “Defendant was not an officer of Debtor (BYJU’s Alpha) and cannot be served in this action pursuant to the Delaware Officer Consent Statute,” he argued. According to Byju, he cannot be prosecuted in this case in Delaware since he held no office at BYJU’s Alpha. 

BYJU’s Alpha Inc is a special purpose financing vehicle formed in the US in September of 2021 to borrow USD 1.2 billion in five-year term loans. A consortium of 37 lenders (Glas Trust) funded Term Loan B (TLB), which was supposed to aid BYJU’s international expansion. At the time the loan was taken on, Alpha’s sole officer and director was Riju Raveendran. BYJU’s Alpha began defaulting on the loan beginning in March 2022 and was finally put under trusteeship on March 3, 2023. 

When Timothy R Pohl, the new trustee for BYJU’s Alpha, took over from Riju Raveendran the same day, he believed that Alpha had over USD 500 million on its books. “By the time I was granted access to those accounts, as of May 22, 2023, they contained less than USD 550,000 in the aggregate,” Pohl had told the court.  

By September of 2023, matters against BYJU’s began reaching the courts. The BCCI sued the company in India over a USD 19 million sponsorship payment. Over in the US, the lenders sued Camshaft, a Miami-based hedge fund. 

Court documents accessed by the reporters show that on September 13, 2023, when media reports began speculating and word began spreading that Alpha no longer had the money, Byju and Anita Kishore received an email from investorrelations@byjus.com.  It was a press release, “shared with the media regarding recent news reports.” It said that the money had been “invested in high security fixed income instruments invested with a multi-hundred billion dollar fund in the U.S.” 

The purported billion-dollar fund was Camshaft Capital. On June 28, counsel representing Alpha, which is now under trusteeship, produced two agreements before the court. The first, a transfer agreement, stated that on March 31, 2023, USD 533 million worth of BYJU’s Alpha interest in Camshaft Capital had been transferred to Inspilearn LLC. Inspilearn, a Delaware-registered subsidiary of Think and Learn, BYJU’s parent company, was not one of the guarantors for the TLB. 

Until last Saturday, no evidence directly linked Byju himself to BYJU’s Alpha. The cases in the US were largely against Riju Raveendran, younger brother of Byju, who was the sole director at Alpha and Inspilearn and technically responsible for all decisions. 

The curious bit about this transfer agreement was that Byju had signed off on the document as “CEO” of BYJU’s Alpha. His brother Riju signed off as Director of Inspilearn as USD 533 million changed hands. 

The June 28 filing by Glas Trust also revealed another agreement. In August 2023, Lion Business Funding LLC, a firm registered in November 2022, entered into a partnership with BYJU’s Alpha whereby it would receive a sum for future receivables from the latter. Signatures on behalf of Alpha were made by both Byju and Riju Raveendran. 

On November 7, 2023, Lion filed a breach of contract case against Alpha and the Raveendran brothers. In April 2024, the Stamford Superior Court in Connecticut ruled that Lion was entitled to USD 2.5 million after the Raveendran brothers failed to appear before it. 

However, Byju has now denied that he was the CEO of BYJU’s Alpha or even an officer with the company. In a related matter, the concerned court had relied on BYJU Alpha’s statement that Byju “was not employed…in any capacity” and had ruled in its favour. “Thus, in reliance on Debtor’s (Alpha) evidence, Judge Dorsey found that Defendant here was not an employee or officer of Debtor,” Byju told the court in his purported defence.

Despite not holding any office at BYJU’s Alpha, Byju had signed off on more than one document on its behalf. In each case, millions changed hands.  Over a year ago, Riju had testified in court about the transfer from Alpha to Camshaft, saying it was “Think and Learn (T&L) that decided to make that transfer,” with Riju simply taking “instructions”. T&L is the parent company of BYJU’s and was headed by Byju himself. 

Aside from the alleged CEO-ship they gave to Byju, the Camshaft transactions are where it all began unravelling for the once ed-tech behemoth. 

The authors had earlier detailed how in 2022, BYJU’s Alpha had transferred the money to Camshaft Capital Fund LP, a Delaware-registered sham hedge fund whose registered address was a pancake franchisee in Miami. Camshaft Capital Fund received USD 533 million from Alpha in three tranches: $318 million in May 2022, followed by $110 million in June and $105 million in July. 

Founded in 2020 by William Cameron Morton, then 23 years old and without a college degree, Camshaft was not a “multi-hundred billion dollar fund” as claimed by Byju. 

The Camshaft transactions between April and July 2022, totalling USD 533 million, guaranteed Alpha a partnership interest in Camshaft. They were facilitated with the help of Rupin Banker, who was working as the structuring division head for the London-based OCI Limited. Banker himself is party to another related case filed against him and OCI by lenders in the US. 

After receiving the Alpha Funds, Camshaft loaned the money to OCI in accordance with the promissory notes. Riju signed off on the promissory notes on behalf of Alpha, which was responsible in case OCI defaulted on the loans. It essentially meant that if OCI failed to pay against the promissory notes, the losses would be taken from the limited partnership agreement between Alpha and Camshaft – the Alpha Funds. All this was done without Glas Trust’s approval or knowledge at the time.

OCI is said to have used the money to purchase inventory for BYJU’s and organise advertising campaigns at discounted rates. That included sponsoring the 2022 FIFA World Cup in Qatar and having Lionel Messi as BYJU’s brand ambassador. 

“In order to secure various purchases made by OCI towards media, advertisement and other allied business purposes, OCI had a right of set-off against the Alpha Funds. OCI set off its outstanding dues against the Alpha Funds as a result of BYJUs’ inability to reimburse OCI,” Byju had told the court in a declaration in October 2024. However, no details of transactions that BYJU’s or Alpha had with OCI have ever been disclosed. The transactions were effectively written off. 

The credit agreement for the USD 1.2 billion loan was executed on November 24, 2021. Almost immediately, in March and April 2022, Alpha first failed to meet certain terms of the loan, which amounted to defaults. It was the same time that the Camshaft transactions had begun. 

In February 2023, after multiple breaches of the loan agreement, Glas Trust notified Alpha and others of their “intent to exercise remedies.” On March 3, 2023, Glas accelerated the loan repayment and took control of it. It removed Riju Raveendran as Alpha’s sole officer and placed Pohl in his place. 

In mid-March 2023, T&L, the holding company of BYJU’s, furnished its unaudited quarterly financial statements ending December 2022. The accounts showed that Alpha had over USD 500 million in “Cash and Bank.” 

The transfer agreement of Alpha’s USD 533 million interest in Camshaft to Inspilearn was done at the end of the same month. It happened on March 31, 2023, with Byju signing off as the CEO of BYJU’s Alpha. 

On May 3, 2023, the matter finally reached court when Glas and Pohl filed a case in the Delaware Court of Chancery. Five days later, Byju told the lenders’ financial advisor that “the money is someplace the Lenders will never find it.” Meanwhile, Riju had told the court that the Alpha Funds were moved since “BYJU’s felt the need to protect the cash.”

When Pohl got control of Alpha’s accounts in July 2023, the money had gone. And on February 1, 2024, there was a 100% transfer of the USD 533 million interest from Inspilearn to an undisclosed “non-US trust” of Inspilearn. 

In a summary judgement in February this year, the Delaware Bankruptcy Court found Riju, Think and Learn, and Camshaft guilty of “fraudulent transfer” of USD 533 million and a “breach of fiduciary duty.”

This report was republished from The News Minute as part of The News Minute-Newslaundry alliance. Read about our partnership here and become a subscriber here.