Byju’s has been at the receiving end of investors, employees and customers’ ire in the recent past, but people connected with the firm are now facing the prospect of jail time.
A U.S. bankruptcy judge on Thursday ordered the arrest of William Cameron Morton, a hedge fund manager who allegedly helped Byju’s hide $533 million from its lenders. Byju’s Alpha, a subsidiary controlled by Byju’s lenders, had filed for U.S. bankruptcy in February after Byju’s defaulted on $1.2 billion in debt. While seeking repayment, the lenders discovered that Byju’s had sent $533 million to William Morton’s Camshaft Capital.
Morton had been previously ordered to appear in court and explain where the funds were held. However he’d told the court he was unavailable because he was hospitalized in a foreign country. The court, however, said the excuse wasn’t credible, given how Morton did not provide any proof that he was hospitalized or that he was abroad, and he did not provide the court with his home address or phone number.
“Given his absolute contempt for this court, I don’t believe him,” the judge said. The bankruptcy judge issued a warrant for Morton’s arrest and said he and Camshaft would be fined $10,000 per day until they complied with court orders to cooperate with the investigation into Byju’s missing funds.
Byju’s American arm, named Alpha Inc, was founded three years ago as a special purpose vehicle. The entity had received a $1.2 billion loan from lenders to finance Byju’s international acquisitions. But the lenders were unhappy that Byju’s hadn’t provided its subsidiary WhiteHat Jr, then worth an estimated $300 million, as a guarantor for the loan. The lenders had consequently seized control of Alpha Inc, removing Byju Raveendran’s brother Riju Raveendran as director, and installing Timothy Pohl in his place. The lenders had also alleged that Alpha Inc under Byju’s had transferred $553 million of their money to a separate entity to “to conceal the whereabouts” of the cash. It had been alleged that Byju’s had hidden the $553 million with William Cameron Morton, who is in his mid twenties, and runs a fund with a pancake shop as its registered address.
An order for William Morton’s arrest is the latest blow for Byju’s, which has been lurching from crisis to crisis over the last few quarters. In the recent past, Byju’s has been raided by the Enforcement Directorate, been hauled to court by entities ranging from investors to the BCCI, had complaints against it be raised in Indian Parliament, been forced to vacate most of its offices, seen its US unit file for bankruptcy, laid off thousands of employees, seen its board members and auditor resign, and seen its investors vote to boot out founder Byju Raveendran and his family. One would think that things could hardly get any worse for Byju’s, but with an order for arrest now out in the US for someone who allegedly manages $553 million of its funds, things might be turning truly grim for the former ed-tech giant.