Legal net tightens around Byju Raveendran after US court ruling on fraud

Raveendran has called for an investigation into what he alleged is a "criminal collusion" between accounting firm EY India, GLAS Trust which represents US lenders, and the IRP

In a surprising turn of events on Friday, Byju Raveendran, the founder of the struggling edtech startup Byju’s, made an unexpected debut on LinkedIn. He called for a comprehensive investigation by authorities into what he claimed was a "criminal collusion" between accounting firm EY India, GLAS Trust (which represents US lenders), and the IRP (Interim Resolution Professional) to dismantle his company. 

Valued at $22 billion in 2022, Byju’s has seen its fortunes almost wiped out due to a massive cash crunch, regulatory issues and disputes with investors, including a battle with US lenders who are demanding $1 billion in unpaid dues, triggering the firm’s insolvency. The worth of once most valued Indian startup is zero now. 

“Me and several employees received a document with conclusive evidence of criminal collusion between EY India, which I otherwise held in high regard, GLAS Trust, which claims to represents the lenders it does not represent, and the IRP who was appointed by an Indian court to protect Byju’s but ended up destroying it. I am sure a thorough investigation of this evidence will reveal the truth. I request the authorities to take that up immediately,” Raveendran wrote in a LinkedIn post. 

Earlier, Sunitha Krishnan, vice president at Byju’s, shared a 16-page whistleblower document, claiming it exposes a troubling truth of collusion between EY and GLAS, a foreign lender. "A few individuals may have hijacked our entire insolvency process for their own gain. The evidence points to @EY_India's Dinkar Venkatasubramanian, who allegedly controlled our insolvency process while simultaneously working with GLAS, a foreign lender. This blatant conflict of interest has devastated thousands of lives," she alleged, also on LinkedIn. 

An EY spokesperson dismissed Raveendran's allegations on Friday night. "We believe the allegations being circulated are not credible and are without basis. The Insolvency & Bankruptcy Code is a regulated process which provides for grievances to be raised with the concerned authorities," said an EY spokesperson on Friday night. 

Interestingly, by that time, Raveendran had abruptly deleted his LinkedIn post, only to restore it later. Some analysts who track the edtech firm speculated that he may have removed it because it coincided with a significant legal development that day. Judge John T. Dorsey of the United States Bankruptcy Court for the District of Delaware issued an order granting summary judgement in favor of Byju’s Alpha Inc., against Riju Ravindran, Camshaft Capital Fund LP and its affiliates, and Think & Learn Pvt Ltd (Byju’s parent company, the Defendants). Riju Ravindran is founder Byju Raveendran's brother. 

The order finds that the defendants, alongside Byju Raveendran, were responsible for orchestrating and executing an unlawful scheme that defrauded the lenders. Damages are to be awarded at a later date. The dispute revolves around the $1.5 billion Term Loan B (TLB) guaranteed by Think & Learn Pvt Ltd, the parent of Byju’s. 

In making its ruling, the court confirmed that multiple transfers of funds from Byju’s Alpha constituted actual fraudulent transfers and conversion (i.e., theft). The court also confirmed that Riju Ravindran violated his fiduciary duties as a director of Byju’s Alpha. 

“We are gratified that the court unequivocally recognised that Riju Ravindran, Camshaft, and Byju’s together conducted a deliberate fraud on a global scale arising from the theft of $533 million. This is a significant step forward in the Lenders’ efforts to recover the stolen funds that are rightfully owed to them,” said the lenders in a statement in connection with the order. 

Legal experts and analysts monitoring the company believe that Byju Raveendran, the founder, now faces substantial legal risk following the US court’s ruling on fraudulent fund transfers. Although Raveendran has not been directly named in criminal proceedings, the court’s finding of fraudulent transactions paves the way for civil liability, potential actions to recover personal assets, and increased regulatory scrutiny. 

“Lenders may argue that as the ultimate decision-maker, he (Raveendran) had knowledge of or actively participated in the diversion of funds, potentially justifying a ‘corporate veil-piercing’ claim,” said Sonam Chandwani, managing partner at law firm KS Legal & Associates. 

Chandwani further noted that if additional investigations uncover wilful intent, Raveendran could face proceedings under the corporate fraud provisions of the Companies Act, 2013, or even criminal charges under Section 420 of the Indian Penal Code (cheating and misrepresentation). The Enforcement Directorate may also intervene if any violations of the Foreign Exchange Management Act (FEMA) are discovered, especially related to offshore fund transfers. 

Commenting on the development in the US, Salman Waris, managing partner at TechLegis Advocates & Solicitors, said that the ruling by the US Bankruptcy Court in Delaware represents a significant legal setback for Byju’s, particularly affecting Byju Raveendran due to his leadership role. 

Waris added that the court's finding that Riju Ravindran breached his fiduciary duty, along with the court's remarks about the actions of Think & Learn, where Byju Raveendran serves as CEO, places him at significant legal risk. The court's comments about funds being hidden where lenders couldn’t trace them also directly implicate Raveendran. This ruling not only harms his reputation but also paves the way for potential personal legal actions by lenders. 

Legal experts indicated that the court ruling could also trigger investigations by the Securities and Exchange Board of India (SEBI) and the Serious Fraud Investigation Office (SFIO) into financial misrepresentation, especially if investors claim they were misled about the company’s financial condition. 

Chandwani said the larger impact extends beyond Byju’s, casting a shadow over India’s startup ecosystem, especially in the edtech industry. “This case sets a precedent for stricter governance standards, increased due diligence by investors, and heightened regulatory intervention,” she said.