Byju’s Faces $533 Million Fraud Lawsuit in US Bankruptcy Court

Indian edtech giant Byju’s is back in the spotlight, but this time not for its innovative learning tools. Instead, it’s facing serious legal heat in the United States. American lenders have filed a lawsuit in a bankruptcy court in Delaware, accusing founder Byju Raveendran and his wife Divya Gokulnath of being personally liable for $533 million in allegedly misappropriated funds. The couple, along with another company executive, are being held accountable for what the lawsuit calls a “fraudulent transfer” of over half a billion dollars.

ReasonBehind the Dispute

This high-stakes legal drama centers around a $1.2 billion loan taken by Byju’s through a US-based special purpose vehicle called BYJU’S Alpha. Lenders claim that $533 million from this loan was illegally diverted to a hedge fund in Miami. In February, a US judge ruled that the fund transfer was illegal, supporting what the lenders had claimed. The new lawsuit filed on April 9 says Raveendran and his team moved the money on purpose without paying anything in return. The lenders also said the team acted unlawfully and tried to hide what they did.

Byju’s Denies Allegations, Calls Case Baseless

Byju’s, however, is not taking these claims lightly. The company issued a strongly worded response, calling the lawsuit “baseless” and “pointless.” According to Byju’s, the lawsuit is just another attempt by the lenders to seize control of the company using “unlawful” tactics. They specifically pointed fingers at Global Loan Agency Services (GLAS), a representative of the lenders, for spreading falsehoods and attempting to manipulate the legal system.

Judicial Ruling Adds to the Pressure

The recent court ruling held that Riju Ravindran, a senior executive, violated his legal responsibilities and played a role in the alleged financial mismanagement. The lenders argue that the leadership team’s actions were part of a deliberate plan to avoid repaying debts. BYJU’S Alpha, which once held the controversial funds, is now under Chapter 11 bankruptcy protection, giving lenders a legal route to pursue asset recovery.

A Complex Cross-Border Legal Battle

While the legal drama plays out in the US, Byju’s is also facing bankruptcy-related challenges in India. Lenders are working to recover funds by selling off Byju’s US-based educational software companies, which were bought for around $820 million. Meanwhile, Indian authorities are assessing the company’s remaining assets, though the eventual payout remains uncertain.

Conclusion

With the $533 million fraud lawsuit now taking center stage, the road ahead looks rough for Byju’s. The outcome of this case could significantly impact the company’s future, both in India and internationally. As the courtroom battle unfolds, industry watchers are keeping a close eye on how one of India’s biggest edtech names navigates its most challenging test.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.