How a CEO’s Faked Results Led to a $300 Million Wipeout
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Whatever challenge comes next, let Microsoft help you keep pushing forward. For more details, visit Microsoft.com slash challengers. Bloomberg Audio Studios. Podcasts. Radio. News. Five years after launching his tech company in Indonesia, Gibran Huzaifa found himself in deep money trouble.

The startup he built, eFishery, that lets farmers feed fish from their phones, was just three months away from running out of cash.

This company had less than US$9,000 in its accounts. It had been trying to raise money unsuccessfully from the region's biggest and smallest investors. David Ramley is a Bloomberg investing reporter based in Singapore. And Gibran told David and a team of Bloomberg reporters that back then in 2018, his company's 100 employees were counting on him. And he felt he couldn't let his company go bust.

On top of that, he actually believed he had a good business. He just needed more money and time to grow it. But where was he going to find the money? Gibran told Bloomberg he spent a long time just staring at an Excel spreadsheet of E-Fishery's finances on his laptop. He thought long and hard about what he could do.

What he started to do very slowly at first was he just started to play with the numbers. It was almost a thought experiment. He just started tweaking the numbers to what he thought investors would want to see. And once he started, he just kept going. Within an hour, he had done what years of hard work couldn't, turn his business into a winner, at least on paper. He hit the send button to show his investors and he was certain he'd get caught. Only he didn't.

Actually, what happened was his existing investors were extremely excited, while the others who had previously said were not really interested were suddenly extremely keen. He went from being someone that no one wanted to being someone who was hounded for investment opportunities in the space of a few months, thanks to that one spreadsheet. So Gibran kept on faking the numbers year after year, and investors' money kept rolling in.

By 2023, E-Fishery had become one of the hottest startups in Southeast Asia. It was valued at more than a billion dollars and had raised millions from some of the world's biggest money managers, including SoftBank, Sequoia India in Southeast Asia, and Singapore's state investor, Temasek. But the more money he got, the bigger his lies became. Once he tweaked the numbers, everything looked good on paper, but the reality was he still didn't have those numbers, so he had to come up with them.

What happens is the claims become too big and the expected growth becomes too big for that method to work. Gibran's house of cards eventually came crashing down after a whistleblower report last November blew apart his entire scheme. Some top investors lost hundreds of millions of dollars.

A subsequent internal investigation found that in the first nine months of 2024, E-Fishery claimed revenues of more than $750 million, while the true number was just a fifth of that.

David and his colleagues spoke to over 20 e-fishery investors, staff and clients, and Gibran himself to piece together this insider account. I wanted to know what made this guy go from being a relatively honest fish farmer slash student to someone who would cost investors hundreds of millions of dollars while still living a relatively modest lifestyle. He doesn't have private jets. He's driving a Hyundai Ioniq 5.

What we're trying to find out is, how did he do it? But the bigger question I thought was, why? This is The Big Tick Asia from Bloomberg News. I'm Wan Ha. Every week, we take you inside some of the world's biggest and most powerful economies and the markets, tycoons, and businesses that drive this ever-shifting region. Today on the show, the rise and fall of e-fishery. How did a young entrepreneur from Indonesia create such a headache for some of the biggest investors in the world?

And what does it say about the risks of venture capital investing in Southeast Asia? Gibran Huzaifa was raised near the slums of East Jakarta. He's the son of a homemaker and a construction worker. He did well in high school and went on to study biology at the Bandung Institute of Technology, known locally as the MIT of Indonesia. And that's where he picked up interest in aquaculture.

The reason why he took an aquaculture class is because he heard the lecturer gave easy A's. That's it. He wanted an easy credit on his transcript, so he signed up. But he actually got inspired, in his words, inspired by the story of aquaculture in Indonesia and its potential.

Indonesia is the third largest seafood producer in the world, after China and India. The fishery sector was worth around $27 billion in 2021. That's according to a World Bank report. And young Gibran saw an opportunity.

He wanted to be the Raja Lele, the king of catfish in Indonesia. And so he hustled. He started speaking with people who had hundreds of fishponds and were pretty big in the industry.

And he asked them, like, what do you need? What is the issue? And they said, you know, at some point, as you get bigger, your issue becomes feeding the fish. Because feeding fish requires both regularity as well as precision. And you need big farms. It takes a long time to get from one side to the other. It'd be great if I had a machine that could do that for me. So Gibran went off and made a prototype of an automated fish feeder.

The initial machine was scrappy. Imagine an old-school milk can, upside down with a spinner that's actually a retrofitted CD player, spitting out fish food.

For months, Gibran traveled across Indonesia to rural villages, trying to sell his machine. He had the early prototype strapped to the back of a motorbike, and he would take that down various lanes to the ends of nowhere and rural farms, going from farm to farm trying to sell that machine to people. His persistence paid off.

Slowly, some farmers began buying or renting the machines. Meanwhile, Gibran enrolled himself into multiple startup competitions in Jakarta, which gave him access to the venture capital community. And that paid off, too. His first pre-Series A investments came from a highly niche Dutch aquaculture-specific investment firm called Aquaspark, as well as a local VC company.

The entirety of the pre-Series A was just $750,000. The money wasn't enough. The company was burning through cash. Investors weren't buying Gibran's pitch for new funds. So he went back to the well, to his first investor, AquaSpark. AquaSpark believed in the model enough that they were willing to stump up $1.5 million for a Series A round. But it came with caveats.

The first two-thirds of the money would be sent over, but the last one-third, $500,000, wouldn't be sent unless he could find other investors for the rest of the round. But how would he convince those other investors? They had all turned him down already. When Gibran asked other Indonesian entrepreneurs, he got answers that were vague and coded. Gibran says the way he heard it, the tip was essentially to fudge the numbers.

In 2018, as he's facing the conundrum between basically losing everything in his eyes or fudging the numbers like everyone else he speaks to in his community and providing exactly what the investors want to see, continuation, growth and a path to actually making a sustainable business. He chose the latter. Gibran was sure he'd get caught, except he didn't. Investors were keen to come on board.

In the end, the Series A round was a huge success. The company raised more than $4 million in total. But Gabron had just replaced one problem with another. The investors he'd brought on expected him to grow and attract even more investments. So Gabron decided to keep faking the numbers. That created a whole new set of math problems. That's after the break.

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Gibran Huzaifa may have lied through his teeth about the success of his e-fishery business, but he still knew how to tell a good story, one that hooked investors big time. Here he is talking about his ambitions to bring the company's tech to fish farmers all around the world.

We're really excited about the future because we're pioneering this sector. We're technically creating this category of fish tech, of aquaculture technology that then has a really big upside on building the market and building the sector even further. For us, the sky is the limit. The story appealed to an investment community obsessed with the idea of impact investing, a way to generate social or environmental benefits while making money.

And after the success of that first round of funding, the money kept coming. In 2022, after a flurry of interest, SoftBank, Temasek, and Sequoia India pumped more money into the company, valuing it at $410 million. But the more funds Gibran raised, the more creative he had to get to cover his tracks. He asked farmers to move their existing business onto his platform in exchange for a commission fee

He began to operate with two sets of books. David, you and the Bloomberg team spoke to Gibran extensively on how it all went down. Did he tell you about what was going through his mind as he was fudging these numbers?

Gibran told us that his moral compass was quite mathematical. In his exact words, if the number of impacts that I can create at a given time outsizes the potential risk and damage that might be created, then it's still a net positive and you should still do it as long as it's a net positive. As evaluations got higher, Gibran found new and bigger ways to make the numbers add up.

That included setting up at least five subsidiaries and thousands of fake accounts to make artificial purchases. For me, one of the key red flags was the lack of impact that his business was having on the feed industry.

If you have tens of thousands of farmers who are buying fish feed on your platform, that should have a seismic impact on the fish feed industry of Indonesia. But some of my sources were saying that they were speaking to the fish feed providers and they in turn were very confused because there was almost no impact. Last year, rumors began to surface on social media, pointing to inaccuracies in sales numbers. And then in November came an allegation of financial misconduct.

The real straw that broke the camel's back was a whistleblower report that basically said the numbers that investors are getting did not match up with the real numbers inside the company. The report sent to an e-fishery board member brought the whole thing crashing down on Gabron. In December, he came clean to his colleagues and investors. He was suspended and replaced, but the damage was already done.

He had inflated revenue by almost $600 million in the nine months through September of last year. More than $300 million of investor money was gone. Gibran denied taking any of it. He said he agreed to speak to Bloomberg to state publicly he didn't steal money and claims it was all paid out to employees, business partners, and creditors.

David, eFishery had the backing of some of the biggest investors in the world. I mean, we're talking about Japan's SoftBank and Singapore's Temasek. The accounting firm Grant Thornton audited eFishery's financial statements in 2022. How is it that Gibran was able to get away with this and for so long?

So I think something important to remember is that Indonesia is an incredibly difficult market to operate in because you don't have a single landmass. You have 17,000 islands spread out. One key problem was it's really hard to find these farms without e-fishery support. And that in turn gave Gibran the chance to quote unquote brief the local area managers about the numbers that would have been expected to come out of that part of the world.

SoftBank, Temasek, and Sequoia India in Southeast Asia declined or didn't reply to Bloomberg's requests for comment. A spokesperson for Grant Thornton said it's deeply concerned over the allegations and is working to understand the full extent of the situation. There was another factor that worked in Gibran's favor, a surge in investor interest in impact investing, with a particular focus on his part of the world.

At the time that eFishery was getting a lot of money from global investors, Southeast Asia was incredibly hot. eFishery was a real gem. This is a business that's doing impact investment work. It's helping farmers. It's using technology. And I wouldn't say this is all impact investing. They all thought profitable business, higher revenue growth, hockey stick projections, emerging market. They all want to put an allocation into Southeast Asia.

The fallout from eFishery has resurfaced questions about whether the traditional venture capital model really works in emerging markets. There's a reason why you haven't seen the scale of investing in Indonesia that you see in China or the U.S.,

This really brings to question whether or not the unit economics of Indonesia makes sense for a lot of business models that have been brought there. The average middle class citizen of Indonesia does not spend the same amount of money in sheer dollar terms that the average middle class citizen of China or Australia do.

For now, investors are still trying to figure out how to wrap up the e-fishery business. Most of the staff have been laid off. Many of the fish feeding devices were sold to recyclers for about $6 each. That's according to people familiar with the matter. The illusion that Gibran built over 13 years took less than three months to collapse.

And as for Gibran? At the moment, a lot of his life looks much like it did at the start of eFishery. He's selling frozen seafood. He's trying to help former colleagues create fish farming collectives so that they can continue the business in some way, shape or form. And he's trying to work out what his options are. There is an investigation underway, so there could well be more consequences for him.

This is The Big Tech Asia from Bloomberg News. I'm Wan Ha. This episode was produced by Yang Yang and Naomi Ng. It was edited by Patty Hirsch and Emily Cadman. There was additional reporting by Olivia Poe and Forrest Mokdar. It was fact-checked by Eddie Duan and mixed and sound designed by Taka Yasuzawa.

Our senior producer is Naomi Chavon. Our senior editor is Elizabeth Ponzo. Our deputy executive producer is Julia Weaver. Our executive producer is Nicole Beamster-Bauer. Sage Bauman is Bloomberg's head of podcasts. If you like this episode, make sure to subscribe and review The Big Take Asia wherever you listen to podcasts. It really helps people find the show. Thanks for listening. See you next time.

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