U.S. bankruptcy court rejects Byju Raveendran’s bid to dismiss $533 million fraud case

A U.S. bankruptcy court has refused to dismiss a major lawsuit against BYJU’s founder, Byju Raveendran and co-founder Divya Gokulnath , allowing allegations of massive fraudulent transfers and asset concealment to move forward.

In a comprehensive order, dated November 20, a copy of which was reviewed by Fortune India, Judge Brendan Linehan Shannon of the district of Delaware ruled that Byju’s Alpha Inc., the U.S. subsidiary now in Chapter 11, has sufficiently alleged that the executives orchestrated a scheme involving the diversion of $533 million to a little-known hedge fund and subsequently hid the assets from U.S. lenders.

According to the filing, Byju’s Alpha, a Delaware entity formed in 2021, wired $533 million between April and July 2022 to Camshaft Capital Fund, a hedge fund founded in August 2020 by William Morton, a 23-year-old, with a registered business address, International House of Pancakes, in the Little Havana neighbourhood of Miami.

The court noted prior findings that Camshaft was effectively a sham, with “no legitimate reason” for the subsidiary to invest more than half a billion dollars into a fund with under $10 million in assets at the time. The transfers allegedly rendered the company insolvent, while its parent, Think & Learn Pvt. Ltd., was already in default under a $1.2 billion credit agreement with U.S. lenders.

The opinion recounts that on March 3, 2023, lenders exercised remedies and installed Timothy Pohl as the sole director and officer of Byju’s Alpha. Yet, within days, the filing states that senior BYJU’s executives resumed efforts to transfer Camshaft LP interest, valued at more than $540 million, to an affiliated entity, Inspilearn LLC.

On March 31, 2023, the transfer was executed for zero consideration, with Raveendran signing as “CEO,” despite having no authority to act on behalf of the company at that point. The court order noted testimony that the asset movement was directed by Raveendran and Gokulnath themselves, not by the nominal director, Riju Ravindran.

The ruling highlights what it describes as a powerful indicator of fraudulent intent: a May 2023 conversation in which Raveendran allegedly told lenders’ advisors that “the money is someplace the Lenders will never find it.” The court said it was “difficult to imagine” a clearer statement of intent to conceal assets from creditors. The filing also alleges a third transfer on February 1, 2024, the day Byju’s Alpha filed for bankruptcy, in which Inspilearn purportedly shifted the LP interest into an offshore trust.

Raveendran and Gokulnath argued that the case should be dismissed because they were not properly served in the UAE, because the U.S. court lacked personal jurisdiction, and because the complaint failed to state valid claims.

The court rejected each argument and accepted evidence that service complied with the Delaware consent statute and UAE procedures, noting that both defendants received notice via phone numbers registered with UAE immigration authorities. It further held that their conduct, acting as de facto officers of a Delaware corporation and allegedly directing fraudulent transfers harming U.S. creditors, brought them squarely within U.S. jurisdiction.

The judge found the complaint adequately alleges that the executives participated in a coordinated scheme to move and hide assets, supporting claims for aiding and abetting breach of fiduciary duty, direct breach of duty (against Raveendran), conversion, accounting, and civil conspiracy.

The testimony cited in the filing describes Riju Ravindran acknowledging that he did not make decisions independently and acted only on instructions from his brother and sister-in-law, making it clear that the duo exercised complete control over the asset transfers. The court also emphasised that multiple individuals associated with the company, including both Ravindran brothers, have been held in contempt for refusing to comply with discovery orders.

With the motion to dismiss denied, the case proceeds deeper into discovery and potential trial, keeping the spotlight on the whereabouts of the still missing $533 million, which the court notes “remains unknown.”