Byju Raveendran, the founder and CEO of the beleaguered edtech firm Byju's, which defaulted on its U.S. debts, has denied orchestrating a scheme to fraudulently transfer $533 million away from lenders.
Raveendran's declaration was submitted on the same day a judge in Delaware was set to review a lawsuit from U.S.-based lenders regarding the missing funds and their efforts to recover $1.2 billion in dues.
For the first time, Raveendran detailed his explanation for the alleged disappearance of the money that lenders have been trying to trace for over a year.
In his declaration, Raveendran attributed Byju's challenges to a deteriorating global macroeconomic environment that negatively impacted the company as it rapidly expanded internationally. He stated, "...just as we were poised to see the returns on these strategic investments, we were hit by a liquidity crunch," in a filing Wednesday morning in the U.S. Bankruptcy Court in Wilmington, Delaware.
He noted that changes in lender composition, particularly represented by GLAS Trust, led to increased pressure and scrutiny from lenders, who seized upon minor technical defaults to assert claims against the parent firm, Think and Learn Pvt Ltd. One of these technical defaults was a delay in providing audited financial statements for the fiscal year ending March 31, 2022. Raveendran explained that this delay stemmed from a previous holdup in the audit for FY21.
“The FY21 audit was delivered to the lenders on August 30, 2022, and was found to be clean, meaning the allegations were false,” Raveendran stated. However, he acknowledged that the delay in the FY21 audit had a "knock-on" effect on the FY22 audit, which could not begin until the previous audit was completed.
"Legitimate use of funds"
Raveendran also elaborated on the legitimate uses of the disputed funds, stating they were allocated through entities like OCI, which provided supply chain procurement services. He explained that Byju's engaged OCI for its international expansion, covering expenses such as marketing and equipment purchases.
"The entire case of 'fraud' and siphoning of money against Riju Ravindran in the United States is based on one statement that their representative wrote on a paper napkin and attributed to me in their media outreach. And that was a lie. Neither did I say those exact words, nor did I imply them indirectly. Contrary to what has been said in the media outreach, I never stated that 'the money is someplace the lenders will never find it,'" he said.
He continued, "...the funds would be utilised for legitimate business operations. As such, those funds would not be available to the lenders to apply against their claim for accelerated debt."
"I sincerely hope this declaration clarifies that the Alpha Funds were utilised for legitimate commercial purposes," he added.
Amid these financial strains, Raveendran expressed deep concern for the future of the company’s employees, stating, “When the malicious intent of others jeopardises the futures of approximately 85,000 employees, it becomes a pain too profound to accept.”
“Neither I nor any of the founders of Think and Learn have personally received any portion of the Alpha Funds or any funds disbursed under the credit agreement,” he stated in the filing.
Lenders have spent more than a year trying to locate $533 million they allege the company has hidden. The dispute also involves a Byju’s affiliate--from Byju's Alpha, a shell company created by Byju's to access US capital markets-- that previously held the missing funds, which creditors took over and placed into Chapter 11 bankruptcy. Three other units were also forced into insolvency and placed under Springer’s control.
Currently, all U.S.-based affiliates of Byju's are in bankruptcy court in Wilmington, Delaware, while Byju’s faces separate bankruptcy proceedings in India.
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