Creditors of what was India’s once most valuable start up have claimed that the Indian education technology firm Byju’s has transferred $533mn from a Florida hedge fund registered at a pancake restaurant.
In court documents filed in Miami, the lenders of Byju claim that the tech group transferred the money in mid-2022 to Camshaft Capital. Camshaft Capital opened in Miami in 2020, and registered an IHOP branch as its Miami office. The lenders claim that the transfer took place as part of the company’s effort to “hide the whereabouts” of the money.
A Byju spokesperson told Bloomberg that the legal documents were reported on Wednesday. The company had “made investments with high-security fixed income instruments through Camshaft, using a fund of more than 100 billion dollars”, but didn’t specify the amount invested.
The latest episode of a US court drama involving an start-up edtech company valued at $22bn in 2022 is the strangest. The story is based on $1.2bn that Byju’s borrowed in November 2021. It has now escalated to a bitter legal battle in Delaware, New York, and Miami.
Byju’s creditors claim that the company has defaulted by not providing financial statements. They have filed a lawsuit in Delaware to seize Byju’s Alpha based in the US, which is the Byju’s entity who borrowed the $1.2bn. The edtech firm countersued the lenders in New York for using hardball tactics and claiming that default claims were “bogus”. Byju’s refused to pay a $40mn in interest payment by June.
In May, lenders in Miami filed a lawsuit against Camshaft Capital, seeking to recover funds they said had been stolen from Byju’s Alpha.
In a Miami court filing, Glas Trust represented the lenders who claimed that the borrower had transferred and concealed over half a million dollars to pay off over one billion in debt.
Camshaft’s lawyers said that the fund “vigorously denied” the statements made in the legal filings of Glas Trust without providing any further details. They also accused Glas Trust of failing to send the legal complaint to Camshaft.
Byju’s was not named in the Florida lawsuit but defended on Wednesday its right to move the money. Byju’s spokesperson stated that the contract with the lenders “does not restrict or prohibit the movement of money or investments”, and rejected claims made by the lenders.
In the filing, creditors claimed that William Morton, now 26, the manager of Camshaft, went on an “excessive spending spree” after Byju Alpha transferred $533mn. They also claimed that Ferrari, Lamborghini, and Rolls-Royce vehicles were registered under his name.
Camshaft brochure to potential investors states that it managed $596mn of “regulatory assets”, as at December 31, last year. The brochure promotes high-risk investment strategies, such as short selling. It also says that the firm charges a 3% management fee.
In its brochure, Camshaft listed its address as an apartment in Miami’s Porsche Design Tower. The units in this tower are valued between $5.2mn and $9.7mn.
Morton claimed in an interview on YouTube that he dropped out of school and did not have formal investment training. He insisted, however, that his credentials are his record because he was seven when he traded his first stock using the Schwab account of his Merrill Lynch-employed father.
Morton stated in an interview that he had always been a good trader. “Had some great calls, you know, back during the Great Recession. . . ] “I was a kid when I did that”.
Morton, who played basketball for Long Beach City College Vikings in the 2019-20 season claimed that he had made a fortune by “shorting” the market in February 2020, while he was unable to work due to an injury. He did this in anticipation of Covid-19’s crisis.
Byju Raveendran – the founder of Byju’s – also took advantage of the pandemic. He tapped into the interest of international investors in online learning and raised billions of dollars. Byju’s reached a new high on the world stage when it sponsored the 2022 Qatar World Cup.
Raveendran lost his star as the lockdowns ended, and byju’s cash burning was revealed in long-delayed reports. In June the company’s auditor Deloitte resigned, as well as three board members representing investors.
Byju’s is trying to get out of the US legal fight. A person familiar with the situation said that Byju’s wanted to sell two education firms it purchased during the pandemic era and raise money from a Gulf sovereign wealth fund to repay angry lenders.