&w=1024&resize=1024,0&ssl=1 "Baiju's founder denied fraud, saying the missing funds were used for legitimate purposes Company News")
The founder of Baiju's, a successful Indian education company that defaulted on its U.S. loans, has denied masterminding a scheme to fraudulently transfer $533 million to lenders.
On the day a judge heard creditor claims of fraudulent transfers against his company, Baiju Ravendran gave his first explanation to the court about what happened to the money that creditors had been trying to track down for more than a year.
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Ravendran says the company borrowed $1.2 billion about three years ago as it planned to use most of the proceeds for international expansion. The loan spent more than $200 million on marketing, including sponsoring the 2022 FIFA FIFA World Cup in Qatar and providing superstar Lionel Messi as a brand ambassador. About $300 million was spent on tangible losses in the gaming business.
“However, just as we were ready to see a return on this strategic investment, we encountered a liquidity crunch,” he said Wednesday morning in a lawsuit filed in U.S. Bankruptcy Court in Wilmington, Delaware.
commercial purpose
The $533 million – which creditors say was transferred overseas to companies linked to the founder – was used for a “legitimate commercial purpose,” Ravindran argued in his motion.
His claims were disputed by the lender's attorney, who accused Baiju of manipulating the accounts. On Wednesday, Ravi Subrahmanya Shankar told the court: “The Rabindran brothers indulged in fraud” to conceal where the money went.
Lenders have long viewed the so-called Alpha Fund as their best chance to recoup some of the $1.2 billion when the pandemic lockdown turned the online learning company into one of India's most valuable startups.
The two sides have been fighting in state and federal courts for more than a year over what happened to the money. The founder told creditors' advisers at a meeting that “money is a place where creditors will never find it,” creditors said in a court filing.
In a statement on Wednesday, Ravindran said he never used those words.
The entire fraud and money laundering case “was based on a statement that their representative wrote on a paper napkin and attributed to me,” he said. During the meeting with advisors, he wanted to explain to borrowers that the funds “will be used for their intended purpose.”
International expansion
Ravindran said that after taking out the loan, Baiju needs to use the funds for its international expansion as soon as possible and has entered into an agreement with OCI Ltd, a British logistics company that provides IT equipment procurement and advertising services.
When Baiju failed to settle its dues, OCI exercised its “right of set-off” against Alpha Fund.
“Neither I nor any of the founders of T&L (Byjus' lending unit) personally received any portion of the Alpha Funds or any portion of the funds distributed under the credit agreement,” he said in the filing.
Instead, the lender's lawyer says Baiju first sent $533 million to a small Miami hedge fund that managed less than $10 million in assets at the time. Hedge funds send money to OCI in exchange for unsecured notes, he said.
Shankar said OCI then issued the cash, which resulted in the bills being reduced by the same amount. He added that the goal of the financial structure was to record the $533 million as assets rather than debt.
