A US bankruptcy judge has issued a warrant for the arrest of hedge fund manager William Cameron Morton following allegations of aiding Indian ed-tech startup Byju’s in concealing $533 million from its creditors.
The accusations stem from court documents filed by Byju’s Alpha, a subsidiary controlled by Byju’s lenders, which asserted that the startup defaulted on $1.2 billion in debt, leading to its US bankruptcy filing in February.
During attempts to recover losses, lenders discovered significant transfers to Morton’s hedge fund, Camshaft Capital, prompting scrutiny over the nature of these transactions.
Judge Dorsey, overseeing the case, summoned Morton to clarify the whereabouts of the funds. Despite claiming incapacitation and being overseas, Morton’s failure to provide evidence or contact details raised skepticism from the court.
Dorsey, unconvinced by Morton’s assertions, issued a warrant for his arrest and imposed a daily fine of $10,000 on him and Camshaft until compliance with court directives regarding the investigation into the missing funds is achieved.
Morton’s alleged involvement in the affair has raised substantial questions. Byju’s lenders, in their legal action against Morton and Camshaft, highlighted the lack of justification for funneling large sums to Morton, particularly given his limited experience and the apparent absence of credible business operations at Camshaft.
Byju’s, formerly valued at $22 billion, now finds itself entangled in this financial complication.
A press release circulated on Friday signaled legal victory for the ad hoc group of term loan lenders of Byju’s. The United States Bankruptcy Court for the District of Delaware issued a preliminary injunction favoring Byju’s Alpha, Inc against several defendants, halting any further movement or utilization of $533 million owed to the lenders.
Furthermore, Judge Dorsey expressed strong condemnation towards the defendants’ actions, labeling the transfer of funds and subsequent concealment as potentially fraudulent. A warrant was issued for Morton’s arrest, who absconded the country before the hearing, for his refusal to cooperate and provide requested information regarding the funds.
The SteerCo, representing the term loan lenders, highlighted the court’s ruling in their pursuit of recovering the missing funds, emphasizing Byju’s alleged involvement in what they describe as a scheme that has significantly devalued the company. Despite court orders, neither the defendants nor Byju Raveendran and Divya Gokulnath have provided specific information regarding the whereabouts of the funds.
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