In related orders in an action to recover over $500 million in alleged fraudulent transfers arising out of the bankruptcy of an education technology company, the U.S. Bankruptcy Court for the District of Delaware denied certain defendants’ motions to dismiss while granting the trustee’s partial motion for summary judgment. The debtor, a related entity, and their ultimate parent company conduct business under the trade name “BYJU’s,” calling themselves the world’s largest education technology conglomerate. The companies were founded by Byju Ravindreen, who served as CEO of the debtor’s parent, a private company formed under Indian law. The trustee alleged that the debtor was formed to borrow $1.2 billion in five-year term loans in 2021 but began defaulting the following year, around which time the debtor allegedly made wire transfers totaling over $500 million to a group of related investment funds. The trustee alleged three additional fraudulent transfers: one in March 2023 from one of the funds to the related entity; one by the founder’s brother, Riju Ravindran, who was involved in business management, on the day that the debtor filed its Chapter 11 petition; and one by Ravindran to a “non-U.S. based subsidiary of BYJU’s” in response to expedited discovery.
In the first order, the court considered separate motions to dismiss from the debtor’s parent company and the investment funds. The debtor’s parent moved to dismiss for insufficient service of process and lack of personal jurisdiction, while the funds moved to dismiss for failure to state a claim. The court found the trustee’s allegations that the domestic subsidiary acted as the alter ego of the foreign parent sufficient to reject the argument that service on the parent via the subsidiary was invalid under the Hague Convention. Likewise, the court found personal jurisdiction over the parent through its relationship with the subsidiary. The court also rejected the funds’ motion to dismiss for failure to state a claim for actual fraudulent transfer, constructive fraudulent transfer, declaratory judgment, and willful violation of the automatic stay, finding each of the trustee’s claims to be adequately pled.
In the second order, the court ruled on the trustee’s motion for partial summary judgment as to the actual and constructive fraudulent transfer counts, as well as for breach of fiduciary duty, declaratory judgment, and conversion. As to the actual fraudulent transfer count, the court rejected the funds’ arguments that they acted as “mere conduits” of the avoided transfers and that they accepted the transfers in good faith, finding instead numerous red flags that should have alerted the funds to the debtor’s fraudulent purpose. The court also found numerous badges of fraud, and no genuine issue of material fact, as to the trustee’s actual fraudulent transfer claim against the funds. Similarly, the court held that the trustee put forward sufficient circumstantial evidence of fraudulent intent to succeed on its actual fraudulent transfer claim against the foreign parent and the related entity. The court also ruled that the trustee established as a matter of law that Ravindran breached his duty of good faith and that his conduct was not covered by the exculpation clause of the debtor’s certificate of incorporation, that the second transfer was ultra vires and void ab initio, and that the evidence supported summary judgment on the conversion claims against Ravindran and the parent company.
The case is In re BYJU’s Alpha, Inc., No. 24-cv-10140 (Bankr. D. Del. Feb. 27, 2025). The trustee is represented by Young, Conaway, Stargatt & Taylor, LLP and Quinn Emmanuel Urquhart & Sullivan, LLP. Ravindran is represented by Chipman Brown Cicero & Cole LLP and Kasowitz Benson Torres LLP. The Camshaft Funds are represented by Saul Ewing LLP. The opinions are available here and here.
