Indian edtech upstart Byju’s will see an extension of an already sprawling legal battle that it has found itself into. Embroiled in yet another serious legal dispute, this time in the US, a lawsuit filed in the Delaware federal court alleging that the edtech behemoth drained cash from its US affiliates, something that is in direct violation of bankruptcy regulations.
According to the allegations, Byju’s has been diverting funds that are meant to repay creditors towards Whitehat Education Technology, a software company owned by Byju’s. So far, it is alleged that Byju’s has transferred nearly $700,000 from the accounts of its U.S. affiliates, entities that were under bankruptcy protection. This occurred without the approval of the court, and was reportedly moved from accounts under the control of a court-appointed trustee, Claudia Springer, who has now filed the lawsuit in an effort to retrieve the funds and prevent further misappropriations.
Springer currently alleges that the misappropriated funds were transferred from the U.S.-based affiliates’ Stripe account to a Wells Fargo bank account associated with Whitehat Education Technology (a firm that is known to provide coding, math, music, and a variety of subjects to young students). The transfers are said to have occurred between September 26 and October 7, suggesting that Byju’s executives acted deliberately to bypass bankruptcy protocols, while individuals using Byju-related email addresses in India also attempted to access the accounts of the U.S. affiliates. Springer has currently filed a court motion seeking to prevent Wells Fargo from processing any additional transfers.
The law states that firms filing for Chapter 11 bankruptcy protection must comply with the existing guidelines regarding the use and movement of funds, and require the court’s approval in transferring cash during the early stages of a bankruptcy case. Byju’s has not done this, which means that the creditors are left unprotected and Byju’s has been accused of Byju’s of attempting to sidestep the bankruptcy process by using the funds for other purposes.
The latest development is simply the latest issue in a long list for Byju’s, which currently owes over $1.2 billion to its lenders. Over the past year, Byju’s lenders have been on a mission to locate $533 million, which they claim the company has concealed in order to avoid repaying debts. This amount was initially held by a Byju’s affiliate, which has since been placed into Chapter 11 bankruptcy by the company’s lenders (several other U.S.-based entities controlled by Byju’s have joined it in bankruptcy as well).
