After its $1.2 billion loan default, Byju’s—once heralded as India’s leading edtech company—is embroiled in a scandal. The case has received a lot of attention from lenders and US courts and involves allegations of illicit transfers of $533 million. Byju Raveendran, the founder, has offered his side of the story for the first time in a court document and passionately opposes these charges. The well-known case has major future implications for the company and is currently being reviewed by the US Bankruptcy Court in Wilmington, Delaware.
Credits: NDTV Profit
The $1.2 Billion Loan and Byju’s International Expansion
When Byju’s obtained a $1.2 billion loan almost three years ago, the story really got started. The majority of the money would be used by the edtech behemoth, which gained notoriety during the pandemic, to support its aggressive plans to expand internationally. During the Covid-19 lockdowns, Byju’s and many other online education platforms saw a surge in demand for remote learning.
In his court brief, Raveendran clarified that the corporation was expected to realize substantial profits from these strategic overseas investments. But unexpected difficulties quickly arose. The company’s goals were hampered by a cash shortage, which was made worse by shifting economic conditions and post-pandemic slowdowns, ultimately resulting in financial difficulties. This financial strain, according to Raveendran, was what kept Byju’s from making the required loan repayments.
The Disputed $533 Million: Fraud or Commercial Use?
At the heart of the legal dispute is the $533 million that lenders claim was transferred offshore to entities linked to Byju’s leadership. Lenders, who have been trying to track down the money for over a year, see this sum as their best chance to recover part of the loan. They allege that the funds were siphoned away in a fraudulent scheme orchestrated by Raveendran himself. In a prior court filing, creditors claimed that Raveendran had boasted during a meeting that “the money is someplace the lenders will never find it.”
In response to these serious accusations, Raveendran offered a detailed rebuttal in his Wednesday filing. He denied making such a statement, calling it a misrepresentation written on a paper napkin by a representative of the lenders. Instead, Raveendran asserted that the money had been used for legitimate commercial purposes, specifically tied to Byju’s ongoing international expansion.
Credits: Hindustan Times
What Happened to the Money?
Raveendran’s defense hinges on the claim that the $533 million, often referred to as the “Alpha Funds,” was not transferred for personal gain or hidden offshore, as the lenders have alleged. According to his account, the funds were linked to agreements with OCI Ltd., a UK-based firm that provided procurement services for Byju’s international operations. These services included sourcing IT equipment and managing advertising, essential elements of the company’s expansion strategy.
However, when Byju’s encountered financial difficulties and was unable to reimburse OCI for its services, the UK firm exercised its “right of set-off” against the Alpha Funds. This legal right allows a creditor to settle debts by claiming funds that would otherwise be owed to the borrower. In this case, OCI used the funds as a way to recover what Byju’s owed, according to Raveendran’s explanation.
The founder emphasized that neither he nor any of the company’s leadership personally received any portion of the Alpha Funds. In his view, the transfer of funds was not fraudulent, but rather a necessary commercial transaction in the face of mounting financial pressures.
The Ongoing Legal Battle
Byju’s and its lenders have been embroiled in a protracted legal struggle in state and federal courts for over a year. For an extended period, lenders considered the Alpha Funds to be their greatest chance of getting back a sizable chunk of the $1.2 billion loan. When Byju’s filed for bankruptcy in the US, the matter took a dramatic turn and the proceedings became much more complicated.
In the latest court declaration, Raveendran is adamant that the funds were used for their intended purpose. He also disputes the narrative that he engaged in any form of misconduct or deception. Despite his explanations, however, the lenders remain determined to uncover the whereabouts of the money, and the case continues to unfold in court.
