An IHOP dinner in the Little Havana neighborhood of Miami, Florida. (File)
One of India’s hottest tech companies, Byju’s, is believed to have hidden $533 million in an obscure three-year-old hedge fund that once said its main business was an IHOP pancake restaurant in Miami, according to lenders trying to recover the money.
Byju last year transferred more than half a billion dollars to Camshaft Capital Fund, the investment firm that William C. Morton founded when he was just 23 years old, some of Byju’s lenders allege in a lawsuit. Morton’s fund received the money despite an apparent lack of formal training in investing, the lenders said. In addition, luxury cars — a 2023 Ferrari Roma, a 2020 Lamborghini Huracan EVO and a 2014 Rolls-Royce Wraith — have been registered in Morton’s name since the transfer took place, court papers show.
The allegations are the latest twist in an increasingly public battle between Byju’s, an India-based education technology company, and lenders who claim the $533 million is collateral for a $1.2 billion loan. The two sides have traded accusations over the loan, with lenders claiming the loan is in default and Byju accusing the lenders of predatory tactics.
“Byju’s has gone to great lengths to conceal the whereabouts of the borrower’s $533 million for the acknowledged purpose of hindering and delaying creditors,” they argued in Miami-Dade County court filings.
Byju’s, once India’s most valuable startup, is trying to strike a deal with creditors and this week made a surprise offer to buy back the loan within six months. To finance that repayment, the company is in talks to sell some of its foreign assets to private equity and strategic investors. In an emailed statement late Tuesday, US time, Byju’s said it is not a party to the legal proceedings in Florida and that no copies of the lawsuit have been served.
Glas Trust, the agent for the creditors, did not notify Camshaft of the lawsuit, the fund’s lawyers said. “Camshaft vehemently denies the statements made in the Glas Trust Company court filing,” Camshaft attorney David Massey said in an emailed statement.
IHOP Fund
Byju sent the money to Camshaft, even though the hedge fund appears to be focusing on smaller clients. Camshaft will only accept $50,000 — “an extremely low threshold for a hedge fund,” lenders said in their lawsuit.
In a 2020 Securities and Exchange Commission filing, Camshaft listed its principal business address as 285 NW 42nd Ave. Far from a typical office, this building is currently home to an IHOP. The restaurant in Miami’s Little Havana neighborhood is surrounded by a car wash and a strip mall with a massage parlor and a sandwich shop.
An employee working a shift on a slow Tuesday afternoon served two families drinking juice and eating burgers while Blake Shelton’s “God’s Country” played in the restaurant. “A hedge fund? No,” the server, Ana, said, her eyes wide.
“If someone came by every day or regularly, I would recognize them,” she said.
She said she had never heard of Morton, Camshaft Capital Fund or Byju’s and that the address had been home to the IHOP for decades. She has worked there for ten years and has never noticed people doing anything that resembled a business deal.
Miles away from that IHOP, an entity linked to Camshaft listed a swanky oceanfront condo at the Porsche Design Tower in Sunny Isles Beach — where people like Lionel Messi own homes — as a business address, court papers show.
In an unrelated lawsuit filed by Camshaft in Miami in June, the hedge fund said its principal place of business is in the Virgin Islands.
Money fight
The missing money was at the heart of the lenders’ actions. The lenders’ agent, Glas Trust, won an early round in the fight by taking control of the Byju unit that had issued the debt. But by then the money was gone. Byju’s was trying to protect the money from predatory lenders, a lawyer for Byju’s Alpha said during a court hearing in May. According to the lawyer, the company had the right to transfer the money under the loan agreement.
Byju’s has alleged in court that the lenders want to take over the entire ed-tech empire, which is led by its founder, Byju Raveendran. Byju’s has asked a Delaware judge to dismiss Glas’s omission.
The company had been trying to strike a deal with creditors to restructure the facility, which itself is one of the largest unrated term loans ever offered by a startup company.
Since founding the company in 2015, Raveendran has raised capital from some of the biggest investors in the tech world, including Mark Zuckerberg’s Chan Zuckerberg Initiative, Silver Lake Management and Naspers Ltd. Byju’s was valued at more than $20 billion last year when it considered merging with a special purpose acquisition company.
The lenders filed the lawsuit to trace the money and recover any excess management fees owed to Camshaft.
Camshaft had not yet filed a response to the lawsuit in Miami as of Tuesday afternoon.
The lawsuit in Miami is Glass Trust Co. LLC V. Camshaft Capital Fund, LP, 2023-022640-CA-01, Miami-Dade County.
