Shruti Suman
According to lenders attempting to recover funds, Byju’s, one of India’s leading tech companies, allegedly concealed $533 million in an obscure hedge fund founded by William C. Morton, who claimed to run his business from an IHOP pancake restaurant in Miami. Byju’s purportedly transferred over half a billion dollars to Camshaft Capital Fund, even though Morton lacked formal investment training. Court documents also reveal that luxury cars were registered in Morton’s name after the transfer, including a 2023 Ferrari Roma, a 2020 Lamborghini Huracan EVO, and a 2014 Rolls-Royce Wraith.
These allegations are part of an ongoing dispute between Byju’s, an Indian ed-tech firm, and lenders who assert that the $533 million serves as collateral for a $1.2 billion loan. Both parties have traded accusations, with lenders claiming default and Byju’s accusing the lenders of predatory practices. Lenders argue that Byju’s has gone to great lengths to hide the funds, hindering and delaying creditors.
Byju’s, once India’s most valuable startup, is seeking to reach an agreement with creditors and has proposed buying back the loan within six months. To fund this repayment, they are negotiating to sell some of their international assets to private equity and strategic investors. Byju’s states that it is not involved in the Florida court proceedings and has not received copies of the lawsuit.
Glas Trust, the creditors’ agent, has not informed Camshaft about the lawsuit, according to Camshaft’s lawyers. Camshaft firmly denies the allegations made by Glas Trust.
Despite Camshaft’s low threshold for investment, Byju’s transferred a significant sum to the hedge fund. Camshaft accepts as little as $50,000, which lenders consider exceptionally low for a hedge fund.
In a 2020 SEC filing, Camshaft listed an IHOP as its principal business address, an unusual choice for a hedge fund. However, the actual IHOP employee stated that she had never heard of Morton, Camshaft Capital Fund, or Byju’s and that the IHOP had been at that location for decades.
Interestingly, Camshaft listed a luxurious oceanfront condo at the Porsche Design Tower in Sunny Isles Beach as its business address in court papers.
The missing funds have been the focal point of the lenders’ actions. Glas Trust, representing the lenders, gained control of the Byju’s unit that issued the debt, but the funds had already disappeared. Byju’s asserted that it was safeguarding the money from predatory lenders and had the right to transfer it under the loan agreement.
Byju’s has claimed in court that the lenders are attempting to seize control of the entire ed-tech empire led by its founder, Byju Raveendran. Byju’s has asked a Delaware judge to reject Glas’s declared default.
The company has been trying to negotiate with creditors to restructure the facility, which is one of the largest unrated term loan B offerings ever from a startup. Since its founding in 2015, Byju’s has attracted investment from prominent tech investors like Mark Zuckerberg’s Chan Zuckerberg Initiative, Silver Lake Management, and Naspers Ltd. Last year, Byju’s was valued at over $20 billion when it considered a merger with a special-purpose acquisition company.
Lenders filed the lawsuit in an attempt to trace the funds and recover any excessive management fees paid to Camshaft. As of Tuesday afternoon in Miami, Camshaft had not yet responded to the lawsuit.
NI Bureau
