Byju's logo is seen in this illustration taken, June 22, 2023.
Credit: Reuters Photo
By Steven Church
Two money-making education apps that are part of the troubled Byju’s software empire were wrongly transferred away from US lenders and must be returned to a court-supervised bankruptcy trustee, a federal judge ruled Tuesday.
A “rogue officer” manipulated Apple Inc. into changing the ownership — and the revenue stream — of two apps that bring in about $1 million a month, according to the trustee, who controls three of Byju’s US units.
The apps are used by parents to download education materials for their children, Catherine Steege, a lawyer for the US units said Tuesday during a virtual hearing. The transfer happened shortly after the trustee took control of the bankrupt units: Epic! Creations, Neuron Fuel, and Tangible Play.
Since the trustee, Claudia Springer, was given control of the three units by a federal judge, unknown people directed by Byju’s, which is based in India, have been grabbing cash, moving source code away from cloud systems managed by Apple and Alphabet Inc.’s Google and changing the names of various online accounts, Steege said.
“These bad actors began a game of ‘catch me if you can’,” Steege told US Bankruptcy Judge John Dorsey in Wilmington, Delaware. They are “trying to stay one step ahead of the trustee.”
Dorsey ordered Apple to return ownership of the apps to the US units. A lawyer for an Indian firm that had been wrongly given ownership of the apps unsuccessfully tried to persuade Dorsey to delay making any ruling.
The dispute is the latest clash between Byju’s and its US lenders. After Byju’s, whose formal name is Think & Learn Private Ltd., defaulted on more than $1.2 billion in debt, US lenders took control of one Byju’s shell company and forced three smaller, US subsidiaries into bankruptcy.
A representative for Byju’s did not immediately respond to a request for comment.
Byju’s bought the firms just a few years ago for $820 million according to court records. Springer is preparing to hold an auction for at least two of the unit in order to raise money to repay Byju’s creditors, including the US lenders.
Lenders have been fighting Byju’s in state and federal courts in the US for more than a year. Byju’s is facing an insolvency proceeding in India, where a court-appointed professional has been tasked with raising money to repay creditors. That professional, Pankaj Srivastava has asked the US court to take no action related to the three US units because they are owned by Byju’s and could be used to repay creditors in India.
Dorsey has rejected those requests, saying the units are US-incorporated entities that are subject to American bankruptcy courts.
Company founder Byju Raveendran has denied wrongdoing, saying his actions were justified in response to overly aggressive tactics used by lenders who specialize in squeezing money out of distressed companies.
The case is Epic! Creations, Inc., 24-11161, US Bankruptcy Court, District of Delaware (Wilmington).