Byju's Founder Raveendran Defends Use of $533 Million Amidst Fraud Allegations

Byju Raveendran, the founder of Indian edtech giant Byju’s, has denied allegations that he orchestrated the fraudulent transfer of $533 million, which lenders claim was moved offshore. The denial comes as Byju's faces mounting legal scrutiny after defaulting on its US debt.

During a court filing in the US Bankruptcy Court in Wilmington, Delaware, Raveendran addressed claims for the first time regarding the whereabouts of the missing funds, which lenders have been attempting to track for over a year. The education company had taken out a $1.2 billion loan nearly three years ago, primarily intended for international expansion.

Raveendran Defends Financial Decisions

According to Raveendran, over $200 million of the loan was allocated to marketing efforts, including sponsoring the FIFA World Cup in Qatar and securing Lionel Messi as a brand ambassador. Additionally, $300 million was used to cover losses for Byju’s Tangible Play businesses. Despite these investments, the company was soon hit by a liquidity crunch, hindering the expected returns.

The $533 million that lenders allege was transferred offshore for illegitimate purposes, Raveendran argues, was used for “legitimate commercial purposes.” He maintained that the funds were directed to a UK-based firm, OCI Ltd., which provided procurement services for Byju’s.

Allegations of Fraud and Mismanagement

Lenders, represented by Glas Trust Company, argue that the funds were unlawfully transferred to entities linked to Raveendran, his brother Riju Ravindran, and a Miami-based hedge fund. They seek to hold these parties accountable, and US Bankruptcy Judge John Dorsey expressed concerns over some of the financial maneuvers, describing the situation as “pretty much straight-up fraud.”

The judge was particularly critical of Riju Ravindran’s actions in March 2023, where he allegedly moved funds without proper authority. Dorsey hinted at a likely ruling against the hedge fund but held off on deciding the fate of Byju’s and its founders.

Lenders Push Back, Call for Accountability

Lawyers representing Byju's and its founder argued for more time to collect information to defend their actions. However, Judge Dorsey indicated he intended to issue a written ruling soon, dismissing further delays. Glas attorney Ravi Subramanian Shankar accused Byju’s of manipulating its accounts to conceal the true destination of the funds. He went as far as to claim the Raveendran brothers played a “game of charades” to mislead creditors.

Lenders have long viewed the so-called “Alpha Funds,” which hold the missing $533 million, as their best chance of recovering the $1.2 billion loan issued to Byju’s during the pandemic-driven boom in online education.

Disputed Claims Over a Napkin Note

Raveendran refuted claims that he once told lenders, “the money is someplace you’ll never find it,” stating that the entire fraud accusation stems from a misattributed statement written on a paper napkin. He argued that his intention during that conversation was to assure lenders that the funds would be used for their intended purpose.

Byju’s International Expansion Plans Under Fire

The founder explained that Byju’s had entered into agreements with OCI Ltd. to help facilitate its global expansion. The logistics firm had been providing advertising and IT equipment procurement services to the company. However, when Byju’s struggled to meet its financial obligations, OCI exercised its "right of set-off" against the Alpha Funds, which further complicated the situation.

Raveendran also made it clear in his filing that neither he nor any of Byju’s founders had personally received any portion of the Alpha Funds.

The Complex Financial Structure

Lenders, however, allege that Byju’s initially transferred the $533 million to a small hedge fund in Miami, which then sent the money to OCI in exchange for unsecured promissory notes. This complicated structure allowed Byju’s to classify the $533 million as an asset instead of a debt on its balance sheet, raising further questions about the company's financial transparency.

As the bankruptcy proceedings unfold, Byju’s continues to face intense scrutiny, with creditors and the courts seeking clarity on the company's financial dealings and the missing funds. Judge Dorsey's upcoming ruling could have significant implications for Byju's future, as well as for its founder Raveendran.

The US bankruptcy case is officially filed under BYJU’s Alpha Inc., 24-10140, in the US Bankruptcy Court, District of Delaware.