The bankruptcy judge in Byju’s Alpha’s Chapter 11 case today (11 June) declined to impose additional sanctions against hedge fund Camshaft Capital and its principal William Cameron Morton—who allegedly took part in a scheme to hide USD 533m from Byju’s creditors—but put Morton on a clock to answer deposition questions and produce document evidence.

Judge John Dorsey of the US Bankrutpcy Court for the District of Delaware presided over a hearing in an adversary case that Byju’s Alpha and term loan agent GLAS Trust Company have pursued against Camshaft, former Byju’s Alpha board director Riju Ravindran, and Byju’s parent company Think & Learn Pvt Ltd. Byju’s Alpha has been under the direction of current CEO Timothy Pohl since last year, when GLAS exercised remedies based on defaults on the term loan and installed Pohl as a director.

Today, Byju’s Alpha and GLAS urged Judge Dorsey to enter a default judgment against Camshaft for allegedly providing false information in response to a discovery request, and for Morton’s refusal to appear to testify in a deposition. The company and loan agent also sought to impose additional sanctions against Morton, who was already held in contempt alongside Camshaft—an order that put Morton and Camshaft on the hook for USD 20,000 in daily fines until they provided documents to Byju’s Alpha and GLAS. That contempt order also included a “bench warrant” that would have led to Morton landing in civil confinement until he produced the documents. Arguing for Byju’s Alpha today, Benjamin Finestone of Quinn Emanuel Urquhart & Sullivan said that Morton’s conduct has demonstrated a lack of respect for Judge Dorsey’s prior orders, and that Morton could have avoided all of the consequences of that conduct by simply complying with those court orders.

“Mr Morton has always had the key in his own pocket to his own jail cell,” said Finestone.

A lawyer for Camshaft said today that Morton’s failure to appear for a deposition stemmed from a fear that he would be subject to arrest, and that Camshaft has taken pains to comply with the document production order. The Camshaft lawyer urged Judge Dorsey to lift the bench warrant for civil confinement, and to free Morton of the approximate USD 1.8m he has racked up in fines under the contempt order.

Judge Dorsey did not fully grant the request for a default judgment additional sanctions, saying he did not have enough evidence to show that Camshaft provided “demonstrably false” information to the other side of the adversary case, although it did appear to have at least provided “misleading” responses to Byju’s Alpha and GLAS.

But the judge also refused to clear Morton of the contempt fines, and criticized the Camshaft principal for fleeing the country to avoid civil confinement, refusing to sit for a deposition, and for taking weeks to make any effort to comply with Judge Dorsey’s order to produce documents to Byju’s Alpha and GLAS. While the judge agreed to temporarily remove the civil confinement order to allow Morton to appear for a deposition without fear of arrest, he also put the Camshaft principal on a short leash.

Judge Dorsey ordered Morton to return to the US and appear within 10 days for a deposition at a location of Byju’s Alpha’s choosing. The judge also set a deadline of 18 June for Camshaft and Morton to turn over all documents responsive to the requests Byju’s Alpha and GLAS have made. If either of those deadlines pass without Morton and Camshaft having complied, Judge Dorsey said he would reissue the bench warrant for Morton’s civil confinement. The judge also said he would suspend additional fines under his prior contempt order until the 18 June deadline, at which point he would reimpose them if Camshaft has fallen short of its obligations.

“Mr Morton needs to start getting real with what’s going to happen if he does not start to comply,” Judge Dorsey said.

In the adversary proceeding, Byju’s Alpha and GLAS have alleged that a USD 533m transfer of the company’s funds at some point landed in the hands of Camshaft, a little-known Florida hedge fund. The transfer, they allege, was an improper attempt to keep the company’s creditors at bay.

Byju’s, its founder Byju Ravindran, and former board director Riju Ravindran—Byju Ravindran’s brother—have all generally denied the allegations. The Byju’s founder, for his part, has refused to disclose where the USD 533m ended up—allegedly saying, “the money is someplace the lenders will never find it.” Meanwhile, Riju Ravindran was recently found in contempt of court in the Byju’s Alpha case for failing to comply with an order that directed him to make an effort to track down the missing funds.