In a startling turn of events, Indian edtech powerhouse Byju’s finds itself entangled in a lawsuit, accused of concealing a staggering $533 million in the Camshaft Capital Fund, an obscure hedge fund with an unusual history rooted in an IHOP in Miami. This financial controversy has come to light as lenders attempt to reclaim the hidden funds.
According to the lawsuit filed by lenders, Byju’s allegedly funneled over $500 million into the Camshaft Capital Fund last year. The fund, established by a 23-year-old named William C. Morton, reportedly received this colossal sum, despite Morton’s purported lack of formal investment training. Following the transfer, Morton apparently added a fleet of luxury cars to his portfolio, including a 2023 Ferrari Roma, a 2020 Lamborghini Huracán EVO, and a 2014 Rolls-Royce Wraith, as detailed in court documents.
This astonishing revelation further complicates the already turbulent relationship between Byju’s and its lenders. At the heart of the dispute lies the $533 million, which lenders claim serves as collateral for a $1.2 billion loan. With lenders branding the loan as in default, Byju’s has countered by accusing them of employing predatory lending practices.
Prominent investor Chamath Palihapitiya weighed in on the unfolding drama, highlighting Byju’s rollercoaster journey from securing billion-dollar investments and expanding globally to facing executive resignations and now these financial allegations. Palihapitiya, known for his investments in startups and venture capital, expressed his disbelief on Twitter, stating, “You Can’t Make This Up.” He then briefly dissected the bizarre and comical nature of the unfolding events.
Recent court filings in Miami-Dade County reveal that lenders argue Byju’s has taken deliberate steps to conceal the whereabouts of the $533 million, primarily to obstruct and delay the creditors’ recovery efforts. Amid these accusations, Byju’s has made an unexpected proposal: it aims to repurchase the loan within a six-month window, potentially by liquidating some of its international assets to attract private equity and strategic buyers. However, Byju’s maintains that it has not received official notification regarding the Florida court proceedings.
Camshaft Capital Fund, despite being a hedge fund, appears to target smaller investors, adding another layer of intrigue to this perplexing saga. A 2020 Securities and Exchange Commission (SEC) filing disclosed Camshaft’s primary business address as an IHOP located at 285 NW 42nd Ave. in Miami. Curiously, the current occupants of this address, a bustling IHOP restaurant, appeared completely unaware of any hedge fund connections.
While the IHOP staff expressed disbelief at the alleged link to a hedge fund, another entity affiliated with Camshaft listed its business address at the upscale Porsche Design Tower in Sunny Isles Beach, Florida—the very building where international soccer sensation Lionel Messi resides. In a separate lawsuit, Camshaft claimed its principal business location to be in the Virgin Islands.
The ongoing financial dispute, aptly dubbed the “Cash Fight,” has now taken center stage, with lenders aggressively pursuing the alleged hidden funds. Byju’s, on the other hand, defends its actions, asserting that the money transfer was permissible under the terms of the loan agreement.
The recent lawsuit seeks to trace the money and recover any excessive management fees paid to Camshaft, which, at the time of this report, had yet to respond to these allegations.
Byju’s, a company that has attracted attention from industry heavyweights like the Chan Zuckerberg Initiative, Silver Lake Management, and Naspers Ltd., was valued at $20 billion last year. This valuation garnered additional scrutiny as merger discussions with a special-purpose acquisition company were underway.