Following-up on September 2023's "The World's Highest Valuation EdTech Transferred A Half-Billion Dollars To A Hedge Fund Based Out Of A Florida IHOP" (sometimes the follow-ups take a while to show up)
From Rest of World, May 27:
From Dubai, the enigmatic founder of Byju’s recounts how he made his empire — and vows to rebuild it.
One morning in January, Byju Raveendran sat in the back seat of his shiny black Cadillac as it sped through Dubai. Just three years prior, the schoolteachers’ son had appeared on the Forbes list of richest Indians as founder and CEO of Byju’s, then one of the world’s most valuable education technology companies. He was dressed casually in a T-shirt and jeans, while his driver, Hashim, was more formally attired in a collared shirt. Raveendran, square-jawed and muscular at 45, told me he typically rides beside Hashim in the passenger seat, seeming intent on underscoring his down-to-earthness. “I always sit there, no, Hashim?” he asked, with a boyish laugh. Hashim nodded.
Former Byju’s employees had told me about Raveendran’s love for staying at the world’s finest hotels, and the upscale properties and luxury cars his family owned when he was based in Bengaluru. I’d heard his wife and co-founder, Divya Gokulnath, described as a jet-setter who networked with Silicon Valley elites.
But beyond the Cadillac, Raveendran didn’t seem keen for me to get a glimpse of his wealth. He was facing accusations of defrauding U.S. lenders for hundreds of millions of dollars, while tens of thousands of his employees had been laid off. I’d hoped to be invited to his home — one source told me it was a mansion in a gated community of Dubai. Instead, he showed up at my hotel on short notice to take me to a South Indian restaurant for a simple breakfast of idli, vada, and sambar — his staple meal during a modest upbringing in a village in Kerala.
Raveendran wanted to show he hadn’t let success get to his head, and wouldn’t let his company’s staggering problems, either. He was defiant that his entrepreneurial journey wasn’t over yet. “Why I am confident of a comeback is that the most valuable thing I had is still with me,” he said, referring to himself.
Byju’s, launched in 2011, developed into a learning app that quickly became one of the best known brands across India. It made Raveendran a pioneer in the rapidly expanding sector of educational technology, in a country with a massive appetite for education solutions. By 2017, marquee investors like the Chan Zuckerberg Initiative had vaulted Byju’s into the upper echelons of global edtech companies, sparking a worldwide acquisitions spree. In 2022, the company was valued at about $22 billion, with roughly 60,000 employees and millions of paying users.
But things unraveled — slowly at first, and then all of a sudden. In September 2023, the Board of Control for Cricket in India took Byju’s to court for defaulting on a $19 million sponsorship payment. BCCI’s complaint came just months after news that Byju’s had allegedly defaulted on a $1.2 billion loan from U.S. lenders. They sued Byju’s parent company, Think and Learn, in a bankruptcy court in Delaware. The details included in that suit were shocking: The plaintiffs alleged that $533 million of the loan had been siphoned to a sham hedge fund once registered at the address of an International House of Pancakes restaurant in Miami. The fund was run by a 23-year-old with seemingly no relevant educational or professional experience, who’d purportedly spent part of the funds on a Ferrari, a Lamborghini, and a Rolls-Royce....
....MUCH MORE
The so-called hedgie is interesting in his own right. From deep in the link-vault, the Wall Street Journal's Bankruptcy newsletter, March 13, 2024:
Hedge-Fund Founder Backed by Byju’s Says He Fled U.S. Out of FearA bankruptcy court judge has threatened to jail William Cameron Morton over nearly $540 million the Indian ed-tech company invested in his hedge fund
A hedge-fund founder at the center of a $1.2 billion legal battle between Indian education-technology company Byju’s and its lenders is staying outside the U.S. despite a court order to return, saying he fears for his safety.
William Cameron Morton said in an interview that he left the U.S. rather than comply with a court order to divulge the whereabouts of nearly $540 million that Byju’s invested in his Florida-based hedge-fund firm, Camshaft Capital.
Morton faces the threat of jail time because he hasn’t turned over that information to investors that lent $1.2 billion to Byju’s, once India’s most valuable startup before its financial problems clouded the country’s venture-capital scene. Judge John Dorsey of the U.S. Bankruptcy Court in Wilmington, Del., recently threatened Morton with “all possible sanctions,” including confinement, if he continued ignoring orders.
Credit funds including Ares Management and Redwood Capital allege that Morton helped Byju’s move more than a half-billion dollars out of their reach through his hedge fund, which they have called a sham operation. Last month, an agent acting on the lenders’ behalf filed a chapter 11 petition for Byju’s Alpha, a shell entity named as the loan borrower, as part of their efforts to track down the money it invested in Camshaft. Byju’s has said it wasn’t required under its loan agreement to keep its assets in cash and did nothing wrong by investing $540 million with Camshaft.
A foreign trust connected to Byju’s cashed out the company’s interest in a Camshaft hedge fund last month, court records show. Morton has defied a court order to disclose the name and location of that foreign trust.
“I declined because it’s all I have to protect my life, and I can’t give that away,” he said in the interview. Morton wouldn’t say where he is now located.
He also denied the lenders’ allegation that Camshaft is a sham, while saying that recent redemptions by Byju’s and other investors have left the firm, which he founded in 2020, with a fraction of the assets under management it once had. The money invested by Byju’s made up the bulk of the $596 million that Camshaft was managing as of last year.
Morton said that while hiking in the woods near Montreal in January, he realized he was being followed by another person, an “athletic man dressed in all black with a ski mask and a backpack.” Morton said he didn’t know who the man was or why he was there. A business associate of Morton’s said Morton had relayed the same account to him in January.
“I am out of the country now out of fear. I don’t want to be doing this,” Morton said. “I have an impending bench warrant for incarceration, and I treat that seriously. This is 180 degrees outside of my character and principles.”
The company has accused the lenders of exploiting a technical default under its credit agreement to extort the company for a windfall, which they deny. It has also characterized its purchase of a limited-partnership interest in Camshaft in 2021 as a “commercially prudent investment” in fixed-income assets. The company has said in court filings that it moved its interest in Camshaft out of the U.S. last year before redeeming that investment last month—just as Byju’s Alpha filed for chapter 11.
Morton’s lawyers said at a hearing earlier this month that he had left the U.S. and retained criminal-defense counsel. In response, Judge Dorsey ordered him to appear in person at a bankruptcy-court hearing scheduled for Thursday and show why he shouldn’t be held in contempt of court.
Timothy Pohl, a restructuring professional appointed by the lenders to run Byju’s Alpha, has said in bankruptcy filings that it had “no legitimate reason” to choose an unknown and unproven hedge fund to manage so much capital. He has sought court orders returning the funds, plus interest, from Byju’s and its affiliates.
The lenders also dispatched private investigators in recent months to visit locations associated with Camshaft and to track down friends and associates of Morton, court papers show. The lenders’ probe found that Camshaft misrepresented the makeup of its management team on its website and had charged above-market fees to investors, including a 3% management fee and 30% performance fee, more than most top-tier funds, Pohl said in a recent filing. His filing said there is “no reason to believe” that Byju’s chose Camshaft for its investment acumen or track record or to maximize a return on investment.
“If those were the goals, there were far superior options,” Pohl’s filing said. “Rather, it appears Camshaft was selected in furtherance of a deliberate scheme to hinder, delay, and defraud creditors.”....