Byju’s financial and legal concerns are continuing to mount and direct narrative around the company. In latest round of accusations from its lenders — whom Byju’s has sued — the lenders claim that the ed-tech firm concealed $533 million in an obscure hedge fund, reports Bloomberg. This controversy saga adds to the existing allegations of hidden funds, luxury cars, and an ongoing legal battle between Byju’s and the lenders.
The report claims the lenders pursuing the recovery of cash claim that Byju’s transferred over $500Mn to Camshaft Capital Fund in 2022, instead of the bank accounts of its US affiliate. This investment firm is described as a Miami-area hedge fund and was founded by William C. Morton, apparently running from a pancake shop. The transfer, at that time, raised eyebrows, primarily because Morton lacks formal training in investing. And if this is not enough, luxury cars such as a 2023 Ferrari Roma, a 2020 Lamborghini Huracán EVO, and a 2014 Rolls-Royce Wraith, were registered in Morton’s name after the transfer.
Byju’s, for its part, claims that it transferred the money to Camshaft to protect it from predatory lenders. The company insists it had the right to make the transfer under the loan agreement, further asserting that lenders are attempting to take over its entire ed-tech empire, led by its founder, Byju Raveendran. Byju’s stated in a press release that it is not a part of this lawsuit, which has been filed by lenders against Camshaft. The company has stated that it invested the money in fixed-income assets. “We wish to clarify that the Credit Agreement dated 24 November 2021 does not prohibit or restrict the movement or investment of monies disbursed thereunder. There is also no requirement for Byju’s to maintain cash as collateral,” a spokesperson for Byju’s commented on the matter.
Glas Trust, the agent for the creditors, has not informed Camshaft about the lawsuit, according to statements from the fund’s lawyers. In response to the allegations, Camshaft has vehemently denied the accusations made in Glas Trust Company’s court filings. “Camshaft vigorously denies the statements made in Glas Trust Company’s” court filing, Camshaft lawyer David Massey said in an emailed statement.
This financial maneuver forms the latest chapter in a very public dispute between Byju’s and lenders who contend that the $533 million serves as collateral for a $1.2 billion loan, which has already seen Byju’s negotiate tricky waters in recent months.
This time, the lenders have accused Byju’s of going to great lengths to hide the whereabouts of the $533 million, asserting that the company’s actions are an attempt to hinder and delay creditors. The legal battle has played out in Miami-Dade County court filings, where the investor group has filed a case in a Miami court in the US. Byju’s, once the crown jewel of India’s startup ecosystem, is now engaged in efforts to strike a deal with creditors. A recent proposal from Byju’s seeks to buy back the loan within six months. To finance this repayment, the company is in negotiations to sell some of its overseas assets to private equity and strategic investors.
One of the most unusual aspects of this case is the location of Camshaft Capital Fund. In a 2020 Securities and Exchange Commission filing, Camshaft listed its principal business address as 285 NW 42nd Ave, which happens to be an IHOP pancake restaurant in Miami’s Little Havana district. The IHOP is surrounded by businesses which have nothing to do with Byju’s flagship edtech business – they consist of a drive-through car wash and a strip mall hosting various businesses, including a massage parlor and a sandwich shop.