Indonesian unicorn eFishery allegedly faked most of its sales

SINGAPORE – One of Indonesia’s most prominent start-ups, eFishery, may have inflated its revenue and profit over several years, according to an internal investigation triggered by a whistle-blower’s claim about the company’s accounting.

A preliminary, ongoing probe into the agritech start-up – backed by investors, including Japan’s SoftBank Group and Singapore’s Temasek – estimates that management inflated revenue by almost US$600 million (S$812 million) in the nine months to September 2024, according to a 52-page draft report circulated among investors and reviewed by Bloomberg News. That would mean more than 75 per cent of the reported figures were fake, the report said. 

The company, which deploys feeders to fish and shrimp farmers in Indonesia, was a darling of the nation’s start-up scene and turned unicorn with a valuation of US$1.4 billion when G42, an artificial intelligence firm controlled by the United Arab Emirates royal, Sheikh Tahnoun bin Zayed Al Nahyan, backed its latest funding round. Unicorns are start-ups that reach a valuation of US$1 billion and are not listed on the stock market.

The start-up has raised hundreds of millions of dollars in an attempt to modernise the country’s fish industry, providing farmers with smart feeding devices as well as feed and then buying their produce to sell to the broader market.

Investors were initially enticed by its profitability at a time when layoffs, chief executive officer resignations and plummeting valuations in the tech sector dominated headlines. It presented a US$16 million profit for the first nine months of 2024 to investors, but the investigation commissioned by the board alleges the firm actually generated a US$35.4 million loss. Revenue for the period was estimated at US$157 million, rather than the US$752 million investors were told, according to the report. Management also inflated revenue and profit numbers for several previous years, the report said.

The report was initiated after a whistle-blower approached a board member with allegations that the accounts were not accurate, according to people familiar with the matter. The board then commissioned a formal investigation in December, and dismissed co-founder and CEO Gibran Huzaifah after the accounting inconsistencies were discovered, the people said. 

“We are fully aware of the gravity of the market speculation, and we take this matter with the utmost seriousness,” eFishery said in an e-mail. “We remain dedicated to upholding the highest standards of corporate governance and ethics in all of eFishery’s operations.”

The report, authored by FTI Consulting, is marked as a draft and subject to further changes as the investigation continues. It is based on more than 20 interviews with company staff and reviews of accounts and messages on WhatsApp, Slack and other channels, according to the report.

The draft report notes that investigators have yet to speak to the auditors or review any audit work papers or other documentation. The numbers are likely to change further, with bank statements, interviews and other accounts still yet to be found or completed.

Mr Huzaifah did not respond to messages seeking comment. Temasek and SoftBank declined to comment, while representatives of FTI and G42 did not immediately respond to queries.

Shareholders and directors have been surprised at the scale of the alleged fraud given the protective measures that were put in place, including channel checks and exit interviews of staff, one of the people said. The company had previously hired PricewaterhouseCoopers and Grant Thornton to audit financial results. The two accounting firms declined to comment via email.

Investor calls have been taking place since the investigation began, and the key question will be what to do with the firm’s assets and remaining cash, one of the people said. While eFishery said it had more than 400,000 fish feeders in operation, initial investigations estimate it had only about 24,000.

Internal books show retained losses at roughly US$152 million from its inception until November 2024. While the total assets stand at US$220 million, they include US$63 million in accounts receivable and US$98 million in investments, according to the report.

The fraud allegations may be damaging for Indonesia’s start-up scene and come at a critical time as young firms and investors struggle to raise new funding. The company was the nation’s latest so-called unicorn, or a start-up valued at more than US$1 billion. BLOOMBERG