Byju's Hid Rs 4,400 Crore In Fund Once Run From Pancake Shop In US, Allege Lenders: Report

One of India's hottest tech companies, Byju's, allegedly hid $533 million in an obscure three-year-old hedge fund that once said its principal place of business was an IHOP pancake restaurant in Miami, according to lenders trying to recover the cash.

Byju's last year transferred more than half a billion dollars to Camshaft Capital Fund, the investment firm founded by William C. Morton when he was just 23 years old, some Byju's lenders claim in a lawsuit. Morton's fund received the money despite an apparent lack of formal training in investing, according to the lenders. What's more, luxury cars - a 2023 Ferrari Roma, a 2020 Lamborghini Huracan EVO, and a 2014 Rolls-Royce Wraith - have been registered in Morton's name since the transfer occurred, according to court papers.

The allegations are the latest twist in an increasingly public battle between Byju's, an India-based education tech firm, and lenders who claim the $533 million is collateral for a $1.2 billion loan. The two sides have been trading accusations about the loan, with lenders claiming it is in default and Byju's accusing lenders of predatory tactics.

"Byju's has gone to great lengths to conceal the whereabouts of borrower's $533 million for the admitted purpose of hindering and delaying" creditors, they argued in Miami-Dade County court filings.

Byju's, once India's most valuable startup, is trying to strike a deal with creditors and this week made a surprise proposal to buy back the loan within six months. To bankroll that repayment, it's in talks to sell some of its overseas assets to private equity and strategic investors. In an emailed statement late Tuesday US time, Byju's said it's not a party to the Florida court proceedings and hasn't been served with copies of the lawsuit.

Glas Trust, the agent for the creditors, hasn't informed Camshaft about the lawsuit, the fund's lawyers said. "Camshaft vigorously denies the statements made in Glas Trust Company's" court filing, Camshaft lawyer David Massey said in an emailed statement.

IHOP Fund

Byju's sent the money to Camshaft even though the hedge fund appears to cater to smaller clients. Camshaft accepts as little as $50,000 - "an extremely low threshold for a hedge fund," lenders said in their court filing.

In a 2020 Securities and Exchange Commission filing, Camshaft listed its principal business address as 285 NW 42nd Ave. Far from a typical office, that building is currently home to an IHOP. The diner in Miami's Little Havana district is surrounded by a drive-through car wash and a strip mall that hosts a massage parlor and a sandwich shop.

An employee on shift on a slow Tuesday afternoon served two families who sipped juice and munched on burgers while Blake Shelton's "God's Country" played in the restaurant. "A hedge fund? No," the server, Ana, said with wide eyes.

"If I had somebody coming in every day, or regularly, I'd recognize them," she said.

She said she'd never heard of Morton, Camshaft Capital Fund, or Byju's and that the address had been home to the IHOP for decades. She's worked there for 10 years and hasn't noticed people doing anything that looked like a business deal.

Miles away from that IHOP, an entity linked to Camshaft listed a swanky oceanfront condo at the Porsche Design Tower in Sunny Isles Beach - where the likes of Lionel Messi own homes - as its business address, court papers show.

In an unrelated lawsuit filed by Camshaft in Miami in June, the hedge fund said its principal place of business is in the Virgin Islands.

Cash Fight

The missing cash has been at the heart of the lenders' actions. The lenders' agent, Glas Trust, won an early round in the fight by gaining control of the Byju's unit that issued the debt. But by then, the cash had vanished. Byju's was trying to protect the money from predatory lenders, a lawyer for Byju's Alpha said during a court hearing in May. The company had a right to transfer the money under the loan agreement, the lawyer said.

Byju's has claimed in court that the lenders are seeking to take over the entire ed-tech empire, which is led by its founder, Byju Raveendran. Byju's has asked a Delaware judge to reject the default declared by Glas.

The company had been trying to strike a deal with creditors to restructure the facility, which itself is one of the biggest unrated term loan B offerings ever from a startup company.

Since the company was founded in 2015, Raveendran has attracted capital from some of the biggest investors in the tech world, including Mark Zuckerberg's Chan Zuckerberg Initiative, Silver Lake Management and Naspers Ltd. Byju's was valued at more than $20 billion last year when it considered merging with a special-purpose acquisition company.

The lenders filed the lawsuit in order to trace the money and recover any excess management fees pay to Camshaft.

Camshaft had not yet filed a response to the lawsuit as of Tuesday afternoon in Miami.

The Miami lawsuit is Glas Trust Co. LLC V. Camshaft Capital Fund, LP, 2023-022640-CA-01, Miami-Dade County.