BYJU’S Allegedly Hid $533 Mn In Offbeat Hedge Fund, Lenders Claim

In yet another twist in the tale, lenders to BYJU’S have alleged that the edtech giant hid $533 Mn in an obscure hedge fund, Camshaft Capital Fund, based out of a Miami IHOP restaurant.

According to court documents cited by Bloomberg, the fund’s founder, William C. Morton, has been acquiring luxury cars since the money transfer took place.

The lenders have argued in a Miami-Dade Country Court in Florida that BYJU’S deliberately hid the funds to obstruct and delay creditors. “BYJU’S has gone to great lengths to conceal the whereabouts of borrower’s $533 Mn for the admitted purpose of hindering and delaying,” creditors argued.

However, in a statement to Inc42, BYJU’S said it is not involved in the Florida court case and has not received any lawsuit copies. “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 edtech added.

The edtech giant further told Inc42 that BYJU’S Alpha has made investments in ‘high-security fixed-income instruments’ with a ‘multi-hundred billion dollar fund’, through Camshaft. The edtech reiterated that its 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,” said BYJU’S.

This allegation throws another wrench into the already heated public dispute between the edtech giant and its lenders. The lenders have also alleged that the $533 Mn is collateral for the $1.2 Bn term loan B (TLB) that the edtech secured in November 2021. In its statement, BYJU’S also reiterated that “the parties continue to engage in negotiations to settle the dispute and we remain committed to an amicable outcome.”

The ongoing feud has seen accusations of default from the lenders and counter-claims by BYJU’S alleging lenders of employing predatory tactics.

Earlier this week, media reports suggested that BYJU’S had proposed to buy back the TLB loan within six months. On the other side, the edtech decacorn has put US-based Epic and Great Learning on sale.

The Tale Of The Missing Cash

The missing $533 Mn was the spark that lit the fire that has since engulfed BYJU’S in deep controversy. 

Glas Trust, the agent representing the lenders, took control of BYJU’S Alpha — the subsidiary responsible for the debt — only to find the money missing. This led the lenders to initiate legal action in Delaware.

During a court hearing in May, BYJU’S lawyers argued that the company transferred the money to protect it from what they described as predatory lenders. They further contended that the loan agreement permitted such a transfer, an argument that the court seemingly agreed with, as it declined the lenders’ request to investigate the transfer.

BYJU’S had further claimed in court that the lenders sought to take over the entire conglomerate led by its founder, Byju Raveendran.

Camshaft, only three years old, has argued in court that Glas Trust hasn’t informed the hedge fund about the lawsuit, denying the statements made in Glas Trust’s court filings, Camshaft lawyer David Massey told Bloomberg in an emailed statement.

The lenders have now filed the lawsuit in Miami to trace the money and recover any excess management fees paid to Camshaft. Camshaft had not yet filed a response to the lawsuit as of Tuesday afternoon in Miami.

BYJU’S seemed to have transferred the money to Camshaft even though the hedge fund appears to cater to smaller clients. Camshaft accepts as little as $50,000, which the lenders alleged was an ‘extremely low threshold’ for a hedge fund.

The hedge fund has also moved its principal business address several times over the past three years. 

In a Securities and Exchange Commission (SEC) filing in 2020, Camshaft listed 285 NW 42nd Ave as its address. However, according to the Bloomberg report, the building has housed an IHOP for decades, which was also independently verified by Inc42.

Further, an entity linked to Camshaft listed a condo at the Porsche Design Tower in Sunny Isles Beach as its business address. In an unrelated lawsuit filed by Camshaft in Miami in June, the hedge fund marked its place of business in the Virgin Islands.