US Court Orders Arrest Of Hedge Fund Manager For Allegedly Hiding $533 Mn For BYJU’S

Edtech giant BYJU'S woes continue to mount as a US insolvency court issued a warrant for the arrest of a hedge fund manager allegedly involved in hiding $533 million from the company's lenders. This dramatic development adds to the growing list of challenges faced by the once-booming startup, including a looming debt crisis, legal battles, and investor discontent.

The Disappearing Millions and a Missing Manager

The saga began with BYJU'S US subsidiary, BYJU'S Alpha, filing for bankruptcy in February 2024. During the subsequent investigation, lenders discovered a significant discrepancy: $533 million from a $1.2 billion term loan had seemingly vanished. The trail led to Camshaft Capital, a hedge fund allegedly managed by William Cameron Morton.

Morton, however, refused to appear before the US court, claiming hospitalization in a foreign country. The judge, unconvinced by this excuse, issued a warrant for his arrest, citing a lack of credible evidence and Morton's failure to provide a valid address or phone number. Additionally, the court imposed a daily fine of $10,000 on Camshaft Capital until it cooperates with the investigation.

BYJU'S Blames Offshore Parking, Raises Doubts About Morton

BYJU'S maintains that the missing funds are not "syphoned off" but rather parked with a non-US subsidiary. However, the lenders' petition against Camshaft and Morton raises red flags. They question why such a large sum was transferred to a "hedge fund with no apparent qualification" and run by a seemingly inexperienced manager.

Morton, on the other hand, told the Wall Street Journal that he feared for his safety and was staying outside the US. He cited a concerning encounter with a suspicious individual, claiming to be followed.

A Perfect Storm for BYJU'S

This latest development comes at a crucial time for BYJU'S. The company is already grappling with a mountain of debt, insolvency proceedings in India, mass layoffs, and several legal battles. Investors are also locked in a public dispute with the company, seeking the removal of CEO Byju Raveendran and a board overhaul.

Financial constraints are further exacerbated by a funding crunch, forcing BYJU'S to delay salary payments and vendor dues. Despite a recent $200 million rights issue (at a drastically reduced valuation), the National Company Law Tribunal (NCLT) has mandated the company to hold these funds in escrow.

The Future of BYJU'S Remains Uncertain

BYJU'S, once a shining star of the Indian edtech sector, now finds itself embroiled in a web of financial and legal troubles. The company's ability to navigate these challenges and regain investor confidence will be crucial to its future success. Whether BYJU'S can emerge from this crisis or succumb to the mounting pressure remains to be seen.