(Bloomberg) — A software company controlled by Indian entrepreneur Byju Raveendran has withdrawn funds from U.S. affiliates in violation of U.S. bankruptcy rules, according to a lawsuit filed Tuesday in federal court in Delaware.
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Money that was supposed to be used to repay creditors was instead transferred to Whitehat Education Technology, a court-approved trustee for the affiliates, the lawsuits say. The trustee, bankruptcy attorney Claudia Springer, sued to recover nearly $700,000 transferred from entities under her control.
The dispute is a small part of a much larger battle between Raveendran’s troubled tech company Byju and lenders owed more than $1.2 billion. For over a year, these lenders tried to track down $533 million that Byju allegedly hid from them.
A representative for Byju’s did not respond to an email seeking comment.
A Byju subsidiary that once held the missing $533 million was acquired by lenders and placed into Chapter 11 bankruptcy, while three other units were forced into insolvency proceedings and placed under Springer’s control. All these US-based entities are before the bankruptcy court in Wilmington, Delaware, while Byju itself is facing bankruptcy in India.
When a company comes under legal protection in the U.S., especially in the early stages of a case, cash generally cannot be moved or used to pay bills without a bankruptcy judge’s approval. Lenders have accused Byju officials of transferring the $533 million in violation of bankruptcy rules.
According to Tuesday’s complaint, Stripe Inc.’s account has. of the US subsidiaries transferred the money from the bankrupt companies to a Wells Fargo bank account linked to Whitehat between September 26 and October 7. Springer alleged that individuals living in India with Byju-related email accounts attempted to access the U.S. debtors’ account, according to images of the company’s Stripe account history included in the complaint.
Springer has sought a court order banning Wells Fargo from transferring money from Whitehat’s account.
Stripe and Wells Fargo did not immediately return messages seeking comment.
Byju’s is facing a fraudulent transfer lawsuit in a U.S. bankruptcy court in connection with these funds. That case concerns Byju’s Alpha, a shell company set up by Byju’s to tap the American capital markets. After Byju defaulted, the lenders took control of the shell company, placed it under legal protection and filed a lawsuit to get the $533 million they said should go to them.
The U.S. bankruptcy case is BYJU’s Alpha Inc., 24-10140, U.S. Bankruptcy Court District of Delaware (Wilmington).
(Updates with details of the transfers in the seventh paragraph.)
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