Indonesia’s eFishery founder Gibran Huzaifah detained as financial manipulation probe deepens
Reports indicate the company allegedly inflated its revenue by as much as US$600 million as at September 2024
[JAKARTA] Gibran Huzaifah, the founder and former chief executive of the troubled Indonesian startup eFishery, has been detained by Indonesian police over suspected manipulation of the aquatech firm’s financial reports.
The Special Economic Crimes Directorate of Indonesia’s National Police announced on Monday (Aug 4) that it had arrested Gibran on suspicion of embezzlement.
“Mr G (Gibran) has been in custody since Thursday, Jul 31,” said Helfi Assegaf, director of the National Police’s Special Economic Crimes Directorate.
Two former eFishery vice-presidents, Angga Hadrian Raditya and Andri Yadi, were also detained. Authorities alleged that the three inflated the company’s revenues over several years to make eFishery appear more promising and attract investors.
In response to The Business Times’ inquiry, FTI Consulting, which has taken over the management of eFishery, said it could not provide a comment as the investigation is still ongoing.
Indonesian aquatech unicorn eFishery, previously valued at US$1 billion, has been accused of financial report manipulation. Reports indicated the company allegedly inflated its revenue by as much as US$600 million as at September 2024.
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In mid-December 2024, two top executives at eFishery – Gibran as well as chief product officer Chrisna Aditya – stepped down from their positions, following the launch of an internal investigation into allegations of financial fraud led by FTI Consulting.
The scandal has sent shock waves through South-east Asia’s startup ecosystem as eFishery had attracted major investors, including SoftBank and Temasek.
Since the case surfaced, the Bandung-based company has ceased operations and laid off more than a dozen employees.
In early February, FTI Consulting announced that it had taken over interim management of the company with the approval of eFishery’s shareholders.
Fake transaction
The company provides automated feeding devices, which it claims are used by thousands of fish and shrimp farmers across Indonesia.
In an interview with Bloomberg, Gibran admitted to deliberately manipulating eFishery’s financial data. He claimed the practice was common among Indonesian startups trying to attract fresh funding, but denied allegations that he had stolen company funds.
The 35-year-old entrepreneur crafted a growth narrative for eFishery using a series of tactics designed to paint a picture of success. One of those tactics involved setting up a network of shell companies and creating more than 5,000 fake farmer accounts.
These accounts were used for internal transactions – buying feed and selling fish – to artificially boost the company’s reported revenue. The scheme was deceptively simple yet appeared sophisticated; while actual fish farmers continued their usual operations, their transactions were rerouted through eFishery’s platform.
To encourage farmers to move their transactions, Gibran offered a 2 to 3 per cent discount as an incentive. The company’s revenue soared from around U$185,000 in 2018 to US$10 million in 2019, a 50-fold jump that helped impress and attract venture capital investors.
Tracxn data indicates that eFishery has raised a total of US$294 million across nine funding rounds.
Law enforcement
Indonesia’s tech scene has been hit by one scandal after another, and the cracks are starting to show.
Beyond the troubles at eFishery, other startups have also found themselves in hot water. Fintech lender Investree got tangled in a bogus lending scheme, while the founder reportedly fled the country amid regulatory investigations.
Just last week, Tech in Asia reported three well-known figures in the industry were arrested over a corruption and money laundering case. They are Donald Wihardja, chief executive of MDI Ventures (the venture capital arm of state-owned Telkom Indonesia); Ivan Arie Sustiawan, former chief executive of TaniHub; and Edison Tobing, TaniHub’s former vice-president of finance.
The case involves a US$25 million investment made in agritech firm TaniHub between 2019 and 2023 by MDI and another state-owned investment company under Bank Rakyat Indonesia.
The fraud allegations could deal a heavy blow to Indonesia’s startup scene, coming at a time when young companies and investors are already scrambling to keep their heads above water amid a tough funding environment.
R Bayu Perdana, a partner at RBP Asia who specialises in white-collar criminal defence and investigations, said law enforcement in Indonesia still tends to be reactive and lacks focus on fraud prevention.
“While this legal action is better than none, we must ask: What about the losses suffered by investors? Is there any form of restitution in this criminal process? If investors have to file a separate civil lawsuit to recover their losses, that would take a considerable amount of time,” he told BT.
“Law enforcement should not only focus on punishing the perpetrators, but also on creating broader deterrent effects. There must be a simple mechanism to help recover lost investor funds.”
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