Byju's Allegedly Moved Funds Through Shell Company, Breaching Bankruptcy Rules

Byju's, the beleaguered edtech company led by Indian entrepreneur Byju Raveendran, is facing fresh legal accusations. According to a lawsuit filed on Tuesday in a Delaware federal court, the company is accused of illegally transferring funds from its U.S. affiliate. The lawsuit alleges that money intended to pay creditors was instead diverted to Whitehat Education Technology. Court-appointed trustee Claudia Springer, a bankruptcy attorney, is seeking to recover nearly $700,000 that was allegedly transferred from accounts under her control.

This legal battle adds to the ongoing conflict between Byju's and its lenders, who claim the company owes them over $1.2 billion. For more than a year, creditors have been searching for $533 million, and they allege Byju's concealed, the report said.

The dispute centres on a Byju's affiliate that once held the missing $533 million, which creditors took over and placed into Chapter 11 bankruptcy. Three other units were also forced into insolvency under Springer’s management. All U.S.-based affiliates are currently involved in bankruptcy proceedings in Wilmington, Delaware, while Byju's faces separate bankruptcy issues in India.

In U.S. bankruptcy cases, court approval is typically required before moving or using funds, especially during the early stages. However, the lenders allege that Byju's officials transferred the $533 million in violation of these rules.

The complaint claims that funds from the affiliates’ Stripe account were shifted to a Wells Fargo account linked to Whitehat between September 26 and October 7. Additionally, Springer accused individuals with Byju's-related email addresses in India of attempting to access the U.S. affiliates' accounts.

Springer is now requesting the court to block Wells Fargo from allowing further transfers from Whitehat’s account. Neither Stripe nor Wells Fargo have commented on the case.

Byju’s is also facing a separate lawsuit over the $533 million tied to Byju’s Alpha, a shell company created to access U.S. capital markets. After Byju's defaulted, lenders took control of Alpha and are suing to reclaim the funds they believe are theirs.

The U.S. bankruptcy case is listed as BYJU's Alpha Inc., 24-10140, in the U.S. Bankruptcy Court for the District of Delaware (Wilmington).