Byju's Crisis: In A Relief To Lenders, US Court Orders Indian Edtech Firm To Freeze $533 Million

According to the report, Ravindran's attorney, Sheron Korpus, contended that the lenders are responsible for any financial difficulties experienced by Think & Learn

Lenders had previously taken control of a holding company established by Think & Learn to issue $1.2 billion in debt

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An US judge ruled on Thursday that Indian edtech firm Think & Learn Pvt, which operates Byju's, must freeze $533 million to safeguard the funds for aggrieved lenders who assert that the money should exclusively be utilised for their repayment, according to a report by Bloomberg. US Bankruptcy Judge John Dorsey's ruling represented a partial win for lenders who had previously requested that the funds be placed under the federal court's supervision to prevent expenditure by the edtech. Dorsey's directive targeted Riju Ravindran, a director of the company and the brother of founder Byju Raveendran.

Ravindran was also instructed to assist in resolving a central enigma of the court dispute: the whereabouts of the funds. "I do not believe him when he says he cannot" get the information about the location from Think & Learn, Dorsey asserted, claims the report.

According to the report, Ravindran's attorney, Sheron Korpus, contended that the lenders are responsible for any financial difficulties experienced by Think & Learn. Korpus argued that the company was justified in withholding the funds from the lenders due to their overly aggressive pursuit of the debt default claim, as relayed to Dorsey. Think & Learn is engaged in legal battles with lenders in state courts in Delaware and New York.

Lenders had previously taken control of a holding company established by Think & Learn to issue $1.2 billion in debt. This entity, Byju’s Alpha, is currently in bankruptcy under Dorsey’s supervision. Ravindran is challenging a decision by Delaware’s Chancery Court endorsing that takeover.

At the outset of the bankruptcy hearing on Thursday in Wilmington, Delaware, Dorsey instructed the arrest of the founder of a small Florida hedge fund for his refusal to disclose the alleged whereabouts of the cash held by Think & Learn. If located by US Marshals, William C. Morton will be detained for contempt of court pursuant to Dorsey’s order. Additionally, Morton is liable to pay $10,000 per day until he furnishes information regarding the funds, which were briefly entrusted to the hedge fund Camshaft Capital Fund, according to the report.

The missing funds lie at the centre of a confrontation between lenders owed over $1.2 billion and Think & Learn. According to Byju’s Alpha lawyer, Benjamin Finestone, the $533 million was initially transferred to Morton’s hedge fund and subsequently relocated to an undisclosed offshore trust, as disclosed last week.

During the hearing, Finestone remarked that Byju’s is grappling with severe financial distress, compounded by disputes with its shareholders and legal battles with its creditors. Additionally, Ravindran testified on Thursday that three out of Think & Learn’s six directors have resigned, leaving only himself, his brother, and his sister-in-law at the helm of the company, as per the report.

Highlighting the urgency of the matter, Finestone emphasised to Dorsey the critical importance of recovering these funds as the company faces imminent financial collapse.