Judge says Byju’s official broke duty to lenders by hiding cash

A top official of Indian tech firm Byju’s violated his fiduciary duty to lenders by wrongly hiding $533 million from them, according to a US court ruling Friday, a win for creditors vying to collect on a defaulted $1.2 billion loan.

Byju’s fraudulently transferred at least part of the money to a small hedge fund based in Miami to keep it out of lenders’ hands, US Bankruptcy Judge John Dorsey also ruled. The two rulings entitle lenders to collect a financial damages award from the company, with the amount is set to be determined in a separate hearing, according to Dorsey’s ruling.

The ruling marks another blow for Byju’s, the technology company founded by controversial entrepreneur Byju Raveendran and his family, which is navigating bankruptcy proceedings in both the US and India. In the US, lenders are fighting to liquidate domestic education software companies that Byju’s purchased for $820 million a few years ago and recoup payments.

“This is a significant step forward in the lenders’ efforts to recover the stolen funds that are rightfully owed to them,” a group of lenders who have been leading the fight said in an emailed statement about the US court ruling. Raveendran’s brother, Riju Ravindran, was the official Dorsey deemed violated fiduciary duty.

Lenders are also trying to get paid through the Indian bankruptcy, although it is unclear how much value is left in the Byju’s enterprise.

Earlier this year, lenders scored another victory in India, when a court appointed the lenders’ agent, Glas Trust Co., to an influential creditors committee in Byju’s insolvency case. The court also found a court-approved restructuring official had wrongly thrown Glas Trust off the committee last year and said the official should be investigated.

The US bankruptcy case is BYJU’s Alpha Inc., 24-50013, US Bankruptcy Court District of Delaware (Wilmington).