Edtech Giant Byju's was alleged to have hid $533 (approx. Rs 4,586 Crore) million in hedge fund established three years ago, that had, at one point, claimed its primary location of business to be an IHOP pancake restaurant in Miami. This allegation was made by lenders who were attempting to recover the funds, reported bloomberg.
According to the report, last year, Byju's allegedly transferred over $500 million to Camshaft Capital Fund, an investment firm founded by William C. Morton when he was just 23 years old. Some of Byju's lenders claimed this in a lawsuit.
The lenders pointed out that Morton appeared to lack formal training in investing, despite receiving the funds. Additionally, court documents revealed that luxury cars, including a 2023 Ferrari Roma, a 2020 Lamborghini Huracán EVO, and a 2014 Rolls-Royce Wraith, were registered in Morton's name following the transfer.
Byju's had gone to extensive measures to hide the whereabouts of the borrowers' $533 million, with the stated intention of obstructing and delaying creditors, according to court filings from Miami-Dade County, as reported by Bloomberg.
IHOP-linked hedge fund
Byju's had transferred the funds to Camshaft despite the fact that the hedge fund seemed to target smaller clients. Camshaft accepted amounts as low as $50,000, which the lenders noted as "an exceptionally low threshold for a hedge fund" in their court filing.
However, in a Securities and Exchange Commission filing from 2020, Camshaft had documented its primary business address as 285 NW 42nd Ave. Instead of being a conventional office space, this building was, at the time, occupied by an IHOP. This diner, situated in Miami's Little Havana district, was encircled by a drive-through car wash and a nearby strip mall that housed a massage parlor and a sandwich shop, as per Bloomberg report.
IHOP employees unaware of Morton, Camshaft Capital Fund, or Byju's dealings
IHOP employees had no knowledge of Morton, Camshaft Capital Fund, or Byju's, indicating no business dealings at that location. However, an entity connected to Camshaft listed a luxury oceanfront condo at the Porsche Design Tower in Sunny Isles Beach as its business address, conflicting with the SEC filings citing the IHOP address. In an unrelated lawsuit filed by Camshaft in June, the hedge fund claimed its principal place of business was in the Virgin Islands, further adding to the operational confusion. The missing $533 million remained a central point of dispute, with Glas Trust gaining control of Byju's unit responsible for the debt, only to discover that the funds had disappeared, cited by Bloomberg.
Byju's had defended the funds' transfer, asserting that it had been undertaken to safeguard the money from predatory lenders, while citing its rights as stipulated in the loan agreement.
Capital secured from major tech world investors
Since its founding in 2015, Byju Raveendran has secured capital from major tech world investors, including the Chan Zuckerberg Initiative led by Mark Zuckerberg, Silver Lake Management, and Naspers Ltd. Byju's had reached a valuation of over $20 billion in the previous year, contemplating a merger with a special-purpose acquisition company.
The lenders initiated the lawsuit to track the funds and reclaim any excessive management fees paid to Camshaft. As of Tuesday afternoon in Miami, Camshaft had not yet submitted a response to the lawsuit, reported bloomberg.