In late 2024, Indonesia’s pride in its first aquaculture unicorn turned to shock when it emerged that eFishery, once valued at US$1.4 billion, was embroiled in a massive fraud.
In April this year, co-founder and former chief executive officer Gibran Huzaifah admitted to systematically manipulating eFishery’s financial reports since 2018 to attract investors and “survive” a cash crunch. He told Bloomberg that the company had been keeping dual books: an accurate internal set and an inflated version for investors.
These falsified figures helped eFishery raise funds and avoid bankruptcy, boosting the startup to unicorn status with backing from global investors such as SoftBank, Temasek, Northstar and Sequoia Capital.
In truth, eFishery had overstated its revenue at US$752 million for the nine months ending September 2024, rather than US$157 million. It boasted a US$16 million profit for the same period when, in reality, it had lost US$35.4 million. The company even inflated operational metrics (reporting 400,000 fish-feeding devices in use instead of 24,000) to bolster its growth story.
Gibran defended the fraud as a desperate act “to survive” and apologised to stakeholders, especially the farmers the startup had intended to help.
But the “shameful act”, as one prominent investor called it, ultimately wiped out an estimated US$300 million in investor value and shattered the credibility of a once-celebrated startup.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
The scandal has exposed serious loopholes in Indonesia’s legal and regulatory framework for startups.
Over the past five years, Indonesia’s tech boom largely outpaced its oversight mechanisms. This meant startups such as eFishery operated with minimal regulatory scrutiny, unlike banks or publicly listed firms.
Since their financial reports are also not subject to public disclosure or regulatory audits, red flags can go undetected.
Moreover, eFishery fell outside the purview of financial regulators. The Financial Services Authority (OJK) confirmed that eFishery was not a licensed financial institution under its supervision.
In effect, no government body was actively monitoring eFishery’s corporate compliance or investor reporting, a stark loophole that the fraudsters exploited.
A perfect storm
In Indonesia, fraud enforcement is typically reactive, often requiring aggrieved investors or whistle-blowers to sound the alarm. Indeed, in eFishery’s case, it was the company’s own board and investors that reported the wrongdoing to the police.
Internal governance gaps compounded the problem, as checks and balances are often absent in startups. Analysts noted that eFishery’s governance structure lacked independent directors and an audit committee.
The failure of external gatekeepers also raised eyebrows – reputable accounting firms had been signing off on eFishery’s books, with investors seemingly accepting the implausibly high numbers. This suggests that due diligence was insufficient, highlighting an ecosystem-wide issue where hype sometimes trumps verification.
In recent years, Indonesia’s regulatory framework for startups and fintech has focused on consumer-facing risks, but not corporate fraud by venture-backed firms. New financial sector laws may have strengthened OJK’s powers but they still leave ambiguity about its oversight of venture investments.
Even if OJK has the authority to investigate financial misconduct in startups, in practice, it has remained relatively passive.
For example, eFishery was removed from OJK’s investment alert list a few months after it was added in early 2023. This suggests that OJK’s supervisory role may have been insufficient in deterring or even detecting potential fraud.
In short, the hands-off approach created a perfect storm where a seemingly high-growth tech startup could inflate its performance for years without rigorous detection.
Building long-term credibility
This scandal underscores that good governance and transparency are essential – not optional – for Indonesia’s startup ecosystem, and key reforms are critically needed.
First, regulatory oversight must improve. The government, including law enforcement, should participate more actively to investigate private-startup fraud. A dedicated startup-monitoring unit or public-private task force could fill current oversight gaps. Even without heavy regulation, requiring high-valuation startups to confidentially report financials would support early detection.
Second, investors must conduct more robust due diligence. Venture capitalists should move beyond trust-based investing, by hiring an independent company to perform background checks, as well as requiring bank statement verifications, audited reports and a board-level audit committee. Stronger term sheet protection can also reduce risk.
Third, startups must embed corporate governance early. Independent advisers, regular board oversight, reputable finance teams, and internal controls must become standard, even ahead of going public. A thorough supervision by the commissioner and shareholders, as well as a whistle-blower mechanism, can further help detect problems before they escalate.
Finally, a cultural shift is needed. Founders, investors and accelerators must prioritise ethics and long-term value over vanity metrics. Celebrating sustainable growth and integrity compliance will help attract responsible capital and rebuild trust.
In an era of shrinking investor trust, robust governance is no longer a compliance checkbox; it is the cornerstone of long-term credibility and competitiveness.
Ahmad Novindri Aji Sukma is a PhD researcher at the University of Cambridge, specialising in law and criminology. R Bayu Perdana is a partner at RBP Asia who focuses on white-collar crime.
