US court pulls up Byju’s Riju Ravindran for concealing $533 mn

The court will announce the amount for financial penalties during a future hearing, it said.

“At a show cause hearing on May 20, 2024 in the United States Bankruptcy Court for the District of Delaware, Judge John T. Dorsey found Riju Ravindran, brother of Byju Raveendran and one of three directors of Think & Learn Pvt Ltd to be in contempt of court following his repeated refusal to disclose or ascertain the location of the $533 million in term loan proceeds that he transferred from BYJU’s Alpha, Inc,” the release said.

The court also prohibited further transferring or using any of the $533 million in loan proceeds, found Byju Raveendran and Divya Gokulnath, co-founders of the company, to be working in concert with Riju Ravindran, and ordered the arrest of hedge fund manager William Morton for his repeated refusal to appear in court.

This compounds the problems for the company that was once valued at $22 billion and has been reeling under several legal cases filed against it by its key global investors, vendors and bondholders. 

A company spokesperson did not immediately respond to queries from Mint. 

The ruling comes after a year-long legal battle between Think & Learn, the parent company of Byju’s and the group of bondholders holding term loan B bonds. 

In 2021, Byju’s Alpha, Inc. was established as a US subsidiary of the company to receive proceeds of the term loan. In 2022, Byju’s Alpha, transferred $533 million in loan proceeds to Camshaft Capital Fund, LP, a hedge fund founded by William Morton. 

In March 2023, Byju’s Alpha’s LP interest in Camshaft Capital Fund was transferred to Inspilearn LLC, and then again transferred to, and then redeemed by, a still undisclosed entity in February 2024. 

As per the lenders, the court further sanctioned Ravindran by precluding him from arguing, in the parties’ ongoing fraudulent transfer litigation, that the transfers that are the subject of that litigation were made for a legitimate purpose. 

“This sanction effectively renders Ravindran without a defense to those causes of action,” it said.

The judge observed that Ravindran submitted a sworn declaration, in which he proposed to explain why he could not obtain the information even though he is one of the three directors of Think and Learn. 

“The actions outlined in the declarations were tepid at best, identifying a few emails that were unanswered and a request for financials that resulted in stale information.”

“I conclude Ravindran’s testimony is not truthful, that he either knows where the funds are located, or is intentionally avoiding obtaining the information from other sources. I therefore find that he is in contempt of my previous order to provide the information,” Judge Dorsey said in the ruling.

What Byju’s lenders said

“Today’s ruling validates what we have known all along: Riju Ravindran, his brother and co-founder, Byju Raveendran, and their conspirators fraudulently transferred $533 million in loan proceeds for no legitimate purpose other than to hide the money from the lenders to whom it is rightfully owed,” the steering committee of the ad hoc group of term loan lenders of Byju’s $1.2 billion term loan said.

“With William Morton and now Riju found in contempt, the walls are closing in around Byju and his house of cards. We will continue to take all necessary legal actions to recover the stolen funds.”

Also Read: Byju’s transfers $533 million to non-US subsidiary, Camshaft no longer in charge

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Published: 22 May 2024, 09:57 AM IST