Gibran Huzaifah looked into space while working on his laptop’s Excel spreadsheet. He was three months from running out of money at eFishery, the Indonesian firm he had built from a fish-feeding prototype to a 100-person extension of himself.
He slowly included phoney numbers into the financial report. Instead of five years of hard labour, he turned his firm into a winner in one hour. He clicked send to show his investors; surely, he would get caught.
But he did not. It pleased his backers that his business was growing. Without knowing the data were manufactured, they contributed extra money to help Gibran avoid bankruptcy. In late 2018, he began building a house of cards that would cost some of the world’s greatest money managers hundreds of millions of dollars.
Six years after starting a second set of accounts (a real one for his team and a second, inflated book for investors), eFishery was one of Asia’s brightest firms with $1.4 billion in valuation and 2,000 employees. In addition to automated fish feeders to enhance output, it offered financing.
By the time it fell, the fraud had spread worldwide with bogus shell firms and inflated accounts. According to an internal enquiry, the corporation reported $752 million in first-nine-month 2024 revenues but actually earned $157 million.
Deception caught several of the world’s most prominent venture capitalists, including SoftBank Group Corp. and Temasek Holdings. Abu Dhabi’s 42XFund and Chamath Palihapitiya’s Social Capital to Sequoia India and Southeast Asia (now Peak XV).
The episode raises unpleasant concerns about ego, groupthink, and how so many red flags were missed in backing a business darling. At least $300 million was lost by investors. It is unclear how much each fund lost, and some may have sold shares at a greater valuation.
The beginning
Gibran was reared in East Jakarta’s slums by a construction worker father and a homemaker mother. MIT of Indonesia, Institut Teknologi Bandung, was his biology school. When his family struggled financially, Gibran was on his own. As food was scarce, he slept in mosques and at school, tutoring for money, working in a convenience store, and various side jobs.
Inspired, he rented ponds after taking a fish-farming course. He rapidly discovered hard work, small margins, and finicky fish.
Aquaculture, or water agriculture, is hard. Too little feed starves fish, while too much wastes money and produces algae. Spawned eggs are nursed in a series of pools before being released into larger ponds and given precise amounts at specific intervals. After months of care, fish must be sold and transported, sometimes alive, to processors and customers. Prices can vary greatly.
Gibran was determined. To make more money, he opened warungs to sell cooked fish and urged grocery stores to carry his product. While managing over 70 ponds, he intended to start a seafood restaurant franchise.
One veteran farmer advised him that growth makes feeding a chore. Gibran welded and programmed an automated fish feeder himself. His student project was a shiny milk bucket connected to a funnel that gravity-fed fish meal pellets onto a rotating disk. Texting opened a slide to release the feed, which scattered across the water.
Using a prototype on his motorcycle, he travelled between farms on rutted roads and village pathways for months. As the initially reluctant farmers observed yield benefits and provided testimonials, the initiative gained traction.
To raise awareness and win cash prizes to keep the business alive, he entered Jakarta startup competitions and quickly learnt the ABCs of venture capital: how to write a pitch deck, present his business model, and thrill investors with vision and financials.
eFishery struggled with their feeders’ expensive pricing and small-scale fish farming’s tight margins. Costs range from $400 to $600, depending on size and incentives. That was too expensive for many Indonesian clients, where 10% of the 280 million people live below the poverty line, and labour is inexpensive.
Gibran immediately switched from selling to renting his machines to farmers. He thought he could launch his feeders faster and recoup their expenditures in a few years. Because he had to buy the equipment ahead, he was spending money.
He tried to attract regional venture funders but was turned down. Singapore regulatory documents show the startup had $8,142 in cash by December 2017.
Aqua-Spark remained interested. It offered $1.5 million in three equal tranches for the Series A round in May 2018. Only other investors could provide the final $500,000.
The bargain bought him time, but no one else joined. Gibran believed he was responsible for the first million dollars if he failed to get investors. Aqua-Spark co-founder Amy Novogratz stated that the agreement did not impose personal liability.
He asked fellow Indonesian founders how they raised new investments, dejected. Gibran believed the unclear, coded advice meant fudging the figures. He had a moral dilemma: be honest and fail, or manipulate the stats and keep the show going for himself, staff, and farmers.
The trolley speeds up
The sentiment changed drastically after a successful Series A fundraising, attracting Singapore-based Wavemaker Partners and San Francisco-based 500 Global’s Southeast Asia fund. It raised $4 million, including Aqua-Spark’s third tranche.
Gibran had to justify the spreadsheet’s new numbers. He started with a simple system. He said fish farmers had already bought feed and sold fish, so he offered 2% to 3% to “move” their business onto eFishery.
It was a sophisticated trick. Field consumers were unaffected. They used the same systems to sell to the same customers at the same prices. However, eFishery’s income increased after those transactions were added to its financial accounts.
Kabayan, a finance scheme that used the startup’s aquaculture expertise to assess harvesters’ credit scores and secure loans from lending platforms, was riskier. A 1% to 3% commission and little risk were promised by eFishery. The truth was worse: eFishery owed the debts, and default rates were high.
eFishery’s Singapore-filed financial filings indicate a 50-fold increase in sales from $185,405 in 2018 to $10 million in 2019. Investors were thrilled. In the same period, it went from a loss to a gross profit, attracting term sheets inconceivable months earlier. With greater money came rapid expansion: applications to buy fish directly from farmers and drop points across islands to distribute feed and collect fish.
It affected some farmers. In Cirebon, West Java, Suganda was one of the first to use the eFeeder machine. A chest-high plastic drum can carry 100 kg (220 lbs) of fish feed. The barrel’s bottom control box decides how much feed the pond fish receive. Farmers downloaded an eFishery app and entered feeding times and feed amounts to utilise the machine. Suganda denied that Gibran asked him to inflate numbers.
Suganda and his Cirebon collective farmers grew with $150,000 in loans from eFishery. His revenue increased by 20% to $603 a month as his pond count went from 10 to 70.
This progress occurred as startup investors sought more help-the-world concepts. Morningstar reported that sustainable fund assets rose 67% to roughly $1.7 trillion in 2020 as investors sought social and environmental partnerships.
With Gibran’s rags-to-riches story and increasing financials, eFishery was a rising star. Gibran raised $20 million in Series B funding in 2020 from private equity firm Northstar Group and Go-Ventures (formerly Argor Capital).
Money and pride
Gibran said eFishery did not need extra money now. The pandemic even helped him balance the books: investors expected revenues to drop, but the business was doing well. He fabricated slow growth to catch up with the genuine data.
He learnt that SoftBank founder Masayoshi Son wanted to talk. In 2021, the COVID-19 pandemic peaked. He could not show SoftBank the fish farms in Indonesia that used his product like he did with prior investors. He only had an hour.
Gibran was anxious at his Bandung office. He bred fish on a small Indonesian farm a few years ago, and now SoftBank, which had raised roughly $100 billion for startup deals through its “Vision Fund,” was ready to verify his conviction in eFishery’s future.
The company provided support to Yahoo Japan, Alibaba Group Holding, and Grab Holdings, which is one of Southeast Asia’s most promising companies. Gibran mentioned that Son, who was listening from Tokyo, interrupted the pitch after 15 minutes. One of SoftBank’s term sheets valued the company at $200 million, which made Gibran very happy.
Sequoia India and Southeast Asia (Peak XV) suddenly submitted a $300 million bid. Temasek, Singapore’s multibillion-dollar state-owned investor, also sought allocations. Gibran opened WhatsApp and saw a text from Temasek CEO Dilhan Pillay, which he thought was spam. Pillay requested time to discuss.
He enjoyed the attention his small startup was getting, but he spent nights worrying about its weak foundations. eFishery reported 1.6 trillion rupiah ($95.3 million) in revenue and 142 billion rupiah before-tax profit in 2021. Revenue fell 40% to 958 billion rupiah, with a pre-tax loss of 164 billion rupiah.
Gibran felt uneasy with the lie, but he remembered the trolley problem. He noticed how eFishery helped certain farmers. His startup had an impact, he believed. Taking this money would put further pressure on eFishery to grow, thus reconciling its two books would have to wait. He was split.
After the interest, SoftBank, Temasek, and Sequoia India offered $90 million in new funding at a $410 million value, according to Gibran, sources, and Alternatives.pe. The price was high for a young firm led by an unskilled Indonesian fish salesperson. Three years ago, eFishery was worth $12 million, but the world’s greatest investors noticed. The deal was accepted.
Red flags missed
In retrospect, warning indicators existed. The 2020 Singapore holding company financial statement was filed in 2024. The lack of disruption in markets where eFishery claimed to be making waves was noteworthy. The company purportedly had over 300,000 feeding units in the field and over 44,000 fish and shrimp farmers buying from its platform by 2023, which should have shaken the supply chain.
Gibran ghosted them when one investor with feed producer ties tried to connect them with eFishery, a win-win for both parties. Another said Gibran was typically three months late with basic numbers and that a feeder component manufacturer told them it only produced enough for 5,000 units per year. Senior officials at Indonesia’s largest fish feed distributors informed a separate investor that their unchanging sales were confusing.
Gibran said he needed larger farms with over $1 million in annual sales for his inflation approach to make sense after his Series C funding round, because the claims and targets were so big. After searching the nation, he found nothing to join.
He states that an employee proposed a solution in early 2022. By establishing a complex network of subsidiaries and managing farmers’ accounts, the firm became sophisticated enough to exaggerate transactions. He notes that this led to the creation of five enterprises with over 5,000 accounts related to fish feed and fish sales.
While trying to meet investor claims, he burned through actual money. The lax checks and collections on the lending site made it popular with fish farmers, but default rates rose. The software had major troubles, requiring nationwide field teams and sales matchers.
By then, phoney numbers made eFishery seem supercharged. Series D fundraising spearheaded by Abu Dhabi-based sovereign fund 42X raised $200 million at a $1.4 billion value. The investors included Malaysian pension fund KWAP.
During all these raisings, eFishery was reviewed by top investors and auditors. Three sources said Grant Thornton audited the Indonesian entity’s 2022 annual financial statements while PwC was a week away from signing off.
Grant Thornton is investigating the eFishery claims and is concerned about them. Gibran said 20 farmers were visited for Series B fundraising and 70 for Series C. He said the due diligence firms used eFishery’s database of farms to tell the startup which they planned to visit, aside from a few random spot inspections.
This allowed Gibran to prepare the ground. Gibran adds that local area managers were handed fact sheets with numbers to tell visitors and informed farmers; the rest was luck.
The same issues that make Indonesia a difficult market can make auditing corporations difficult. The nation has over 17,000 islands, and much of the job is done in rural areas where exact addresses are not enough, and farmers need to reach the front door.
The fall
Gibran planned to fix the business after investors were told it was stopping expansion to focus on financial sustainability before going public. Make eFishery Great Again was his Project MEGA.
To improve its financial health, eFishery aimed to more than halve its losses before tax to 107 billion rupiah, cut late loans on its Kabayan programme, and persuade more farmers to use its technology. It also wanted additional farmers to buy and sell fish through them. They had a challenge: half of their 28,000 Kabayan fish and shrimp growers were idle. Documents showed another 7,000 frozen accounts. Over 90% of eFishery’s sales came from firms with less than 2% gross profit margin.
Gibran revealed in a 30-minute Zoom chat on December 11 that he confessed to Aqua-Spark co-founder and eFishery board member Novogratz, who was one of the company’s original investors and his mentor. Gibran stated that Novogratz was deeply disappointed in him.
Two days later, on December 13, eFishery’s Steering Committee suspended Gibran. An interim CEO and CFO took control of eFishery, including its bank accounts.
Many lessons learnt
Investors are contemplating how to close the company. The board hired FTI Consulting Singapore to evaluate and manage the organisation. It advised closing the business and returning investors’ money. Abu Dhabi’s 42X, which spent $100 million in April 2023, may receive $8.3 million two years later.
A mystery is what happened to all the money. The FTI research suggests that some staff stole money, and Gibran received a salary and bonus comparable to a much larger company, but he seemed to live modestly. One worker drove a Hyundai Ioniq 5 to work. Indonesian tycoons have fled with millions of investment dollars, while he stays in Bandung, a second-tier city where he founded the firm to cut costs. None of his critics have proven he embezzled.
According to Winnie Yamashita Rolindrawan, partner at Indonesian law firm SSEK, the scandal exposed vulnerabilities in regulatory oversight and corporate governance in Indonesia.
While Rolindrawan advocated for VCs adopting a more thorough due diligence approach, on their part, startups must maintain accurate and verifiable records. Investors need to closely monitor, apart from carrying out post-funding audits, to ensure that startups operate transparently.