Missing $533 Mn Used For Legitimate Commercial Purposes: BYJU’S CEO

Caught in the middle of multiple legal cases, BYJU’S cofounder and CEO Byju Raveendran, has now reportedly denied all allegations of orchestrating a scheme to fraudulently transfer $533 Mn out of its $1.2 Bn term loan B (TLB).

As per a Bloomberg report, Raveendran said that the $533 Mn in question were used for “legitimate commercial purpose”.

He made the comments in a filing with a US bankruptcy court in Wilmington, Delaware, on the same day a judge was set to consider the TLB creditor’s plea alleging that the edtech startup fraudulently transferred the funds.

In the filing, the beleaguered cofounder said that the company planned to use most of the proceeds of the $1.2 Bn TLB (raised in November 2021) for international expansion. He, however, added that BYJU’S was hit by a “liquidity crunch” just as the company was “poised to see the returns on these strategic investments”.

Raveendran reportedly claimed that the edtech “needed to use the funds for its international expansion as quickly as possible” right after raising the TLB. He added that the company, quickly afterwards, entered into agreements with UK-based OCI Ltd., which offers procurement services for IT equipment and advertising.

As per the report, BYJU’S was subsequently unable to reimburse OCI for its services, forcing the latter to exercise its “right of set-off” against the edtech’s “Alpha Funds”. 

“Neither I nor any of the founders of T&L (BYJU’S parent Think & Learn) have personally received any portion of the Alpha Funds or any of the funds disbursed under the credit agreement,” Ravendran reportedly said.

For the uninitiated, the missing $533 Mn belongs to a bankrupt US-based shell company, BYJU’S Alpha Inc, which was taken over by the lenders after their loan defaulted. The company’s TLB creditors have long considered funds parked under BYJU’S Alpha as their best bet to claw back some of the capital. 

As a result, the edtech major’s lenders have dragged the company to various courts, seeking clarity over what happened to the alleged syphoned funds. In a filing with a US court, the lenders claimed that Raveendran told its advisors during a meeting that “the money is someplace the lenders will never find it”.

On Wednesday (October 9), BYJU’S cofounder claimed that he never used those words, adding that the entire case of fraud and syphoning of funds “is based on one statement that their representative wrote on a paper napkin and attributed to me (Raveendran)”. 

The CEO also claimed that during the meeting with the advisors, he wanted to explain to the lenders that the funds “would be utilised for their intended purpose”.

The developments came on the same day a trustee of one of BYJU’S affiliates accused the edtech startup of transferring $700,000 from its US affiliates in violation of the bankruptcy proceedings.

The trustee has filed a case to recover the funds that were transferred from entities under her oversight. Notably, in August this year, a US court directed Byju Raveendran’s brother Riju Ravindran to pay a fine of $10,000 per day until he helped locate the missing amount.

Owing to this, as many as four units in the US are facing bankruptcy proceedings, and, as per rules, such companies cannot transfer money without the bankruptcy judge’s approval.

At the heart of all this is the $1.2 Bn TLB extended by 37 financial institutions to BYJU’S through a credit agreement in November 2021. As funding winter reigned supreme, the company last year defaulted on the payments, forcing the creditors to move courts.

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