To avoid having its assets seized to cover a Loan default, lenders claim Byju’s hid USD 533 million in a mysterious, three-year-old hedge fund. However, the ed-tech giant claims that its agreement with lenders did not explicitly forbid the movement of funds.

According to a lawsuit filed in a US court, Byju’s US-based subsidiary Alpha Inc transferred more than half a billion to Camshaft Capital Fund in 2022, according to Bloomberg.

Even though William C. Morton didn’t appear to have any formal investment training when he founded the investment company when he was only 23 years old, he was given the money; according to a lender petition filed in court, luxury vehicles including a 2023 Ferrari Roma, a 2020 Lamborghini Huracan EVO, and a 2014 Rolls-Royce Wraith have been registered in Morton’s name since the transfer. Due to a payment default, lenders claim the cash was used as collateral for a USD 1.2 billion loan and now they want control of it.

Byju’s, however, said the transaction was fully within the bounds of its credit agreement with lenders, which explicitly does not proscribe or limit the movement or investment of funds disbursed under its terms.

“As a commercially prudent borrower and like any other large corporate treasury, Byju’s Alpha has made investments in a multi-hundred billion dollar fund with high security fixed income instruments. Our Credit Agreement with the lenders does not prohibit or restrict the movement or investment of monies disbursed thereunder. There is no requirement for Byju’s to maintain cash as collateral,” a company spokesperson said.

Lenders in Miami-Dade County court filings contended that Byju’s made significant efforts to obscure the destination of the borrowers’ USD 533 million, purportedly with the intent of impeding and protracting creditors’ efforts.

“For the record, the Byju’s entities are not parties to the proceedings mentioned in the recent media reports, and have not been served with copies of the complaint or motion. This is the first that we are hearing of these proceedings. The court filing appears to have been made prior to the latest loan repayment proposal. The parties continue to engage in negotiations to settle the dispute, and we remain committed to an amicable outcome,” the spokesperson said.

Byju’s had in November 2021 raised USD 1.2 billion term loan from a consortium of US-based creditors. In June this year, it missed a USD 40 million interest payment. Since then, Byju’s has been negotiating with its TLB (Term Loan B) lenders to find an amicable resolution. Earlier this week, it proposed to sell two of its assets – Great Learning and Epic – to repay the loan.

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