In 2023, eFishery, formally known as PT Multidaya Teknologi Nusantara, achieved unicorn status, becoming Indonesia’s first aquaculture tech startup to reach a valuation of approximately $1.4 billion. The company, which used technology to aid rural fish farmers, attracted notable investments from Softbank and Temasek, quickly becoming a darling of the startup scene. At the helm was co-founder and CEO Gibran Huzaifah Amsi El Farizy, seen as the driving force behind eFishery’s success.
However, the company’s ascent proved short-lived. In December 2024, an investigative audit revealed allegations that eFishery’s financial statements had been fraudulently inflated by $600 million. During the first nine months of 2024, the company had reported profits of $16 million, while it was actually operating at a loss of $35.4 million. This revelation led to Gibran’s removal from his position, and he, along with other company executives and employees, could face criminal charges and potential imprisonment, based on laws in Indonesia.
Lawyers suggest the eFishery incident spotlights weaknesses in Indonesian regulatory supervision and governance standards. It also highlights systemic factors that emphasize growth over profitability within the country’s tech sector, raising concerns about the role of investors and their due diligence processes.
What Happened?
Before the scandal erupted, eFishery was regarded as a successful startup that used technology to increase the efficiency of fish farmers, assist them in selling their products, and secure the credit they needed to expand their businesses.
In 2024, whistleblower claims surfaced, accusing the company of falsifying financial statements under Gibran’s guidance. An ensuing investigation unveiled that eFishery had allegedly misled banks and investors by providing false financial statements that showcased profitability, despite consistent operational losses since 2021.
Specifically, the possibly fraudulent financial statements reportedly contained fabricated profits connected to companies indirectly owned by Gibran, which were falsely presented as legitimate customers. These companies are alleged to have generated counterfeit invoices, contracts, ledgers, and financial statements, furthering the deception.
“The allegedly fraudulent financial statements were not widely known within the company but were reportedly orchestrated by Gibran, along with several company executives and employees. Thus, the potential legal consequences of the alleged accounting fraud would fall on Gibran and any company executives and employees directly involved in the alleged fraud,” stated Winnie Yamashita Rolindrawan, a partner at Indonesian law firm SSEK.
Under Indonesian law, Gibran and others involved could face significant legal consequences, including criminal charges that might lead to imprisonment.
What Problems Did the Scandal Expose?
The eFishery scandal has brought to light vulnerabilities in regulatory oversight and corporate governance in Indonesia.
According to Rolindrawan, “It highlights the need for stronger financial oversight and mandatory financial disclosures.” She further added, “Stricter compliance requirements and improved corporate governance should be implemented, along with clearer disclosure obligations regarding conflicts of interest, especially in cases where key executives have ownership stakes in related companies.”
Furthermore, the scandal has brought into question the quality of due diligence undertaken by investors and the necessity for more comprehensive and rigorous scrutiny of startups.
To mitigate risks, Rolindrawan advises that investors adopt a more thorough due diligence approach across legal, financial, and other crucial areas. Furthermore, startups are advised to maintain accurate and verifiable records, including financial statements. She adds that investors should also implement greater monitoring and post-funding audits to ensure startups operate transparently and honestly.
What Are the Broader Implications in Indonesia’s Tech Sector?
Beyond the calls for better financial oversight, enhanced corporate governance and more comprehensive due diligence practices, the eFishery scandal also highlights the requirement to shift away from the “hypergrowth paradigm” and towards more sustainable business models within Indonesia’s startup ecosystem, according to Rolindrawan.
“Since startups often prioritise rapid expansion and achieving unicorn status, they may place growth ahead of sustainable business practices. The eFishery case exemplifies how this hypergrowth mindset can lead to financial misreporting and operational shortcuts, ultimately jeopardising the company’s long-term viability,” says Rolindrawan.
To address the issue, Rolindrawan suggests that the Indonesian government should take steps to enhance corporate governance and financial reporting standards among startups and encourage investors to adopt more comprehensive due diligence practices.
“One would hope the government will revisit existing regulations to address these issues and close any regulatory gaps,” she added.
