How a CEO’s Faked Results Led to a $300 Million Wipeout

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Five years after launching his tech company in Indonesia, Gabron Huseeifa found himself in deep money trouble. The startup he built, E Fishery, that lets farmers feed fish from their phones, was just three months away from running out of cash.

This company had less than nine thousand US dolars 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 Gabron told David and a team of Bloomberg reporters that back then in twenty eighteen, his company's one hundred 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. But where was he going to find the money? Gabron told Bloomberg he spent a long time just staring at an Excel spreadsheet of

What he started to do very slowly at first was he just started to play with the numbers. It was almost the 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 but not really interested, was suddenly extremely keen. He went from being someone that no one wanted to being someone who was how did for investment opportunities in the space of a few months thanks to that one spreadsheet.

So Gabron kept on faking the numbers year after year, and investor's money kept rolling in. By twenty twenty three, 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 and Southeast Asia, and Singapore's State investor Temasek, but the more money he got, that 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.

Gabron'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 twenty twenty four, E Fishery claimed revenues of more than seven hundred and fifty million dollars, while the true number.

Was just a fifth of that.

David and his colleagues spoke to over twenty e Fishery investors, staff and clients, and Gibraun himself to piece together this insider account.

I wanted to know what made this guy go from being a relatively honest Phish farmer slash student to someone who had 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 Ionic five. What we're trying to find out is how did he do it? But the big question I thought was why.

This is the big take Asia From Bloomberg News. I'm Wanha. 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 in 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

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 twenty seven billion dollars in twenty twenty one, that's according to a World Bank report. And young Gebron saw an opportunity.

He wanted to be the Raja Leile, the king of catfish in Indonesia, and so he hustled. He started speaking with people who had hundreds of fish ponds 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

So Gabron went off and made a prototype of an automated fish feeder. The initial machine was scrappy. Imagine an old school milkcan upside down with a spinner that's actually a retrofitted CD player, spitting out fish food. For months, Gabron 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, Gabron 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 and investment firm called Aquaspark, as well as a local VC. The entirety of the pre Series A was just seven hundred and fifty thousand US dollars.

The money wasn't enough. The company was burning through cash. Investors weren't buying Gabron'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 one point five million dollars for his Series A round, but it came with caveats. The first two thirds of the money would be sent over, but the last one third, five hundred thousand dollars 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 Gabron asked other Indonesian entrepreneurs, he got answers that were vague and coded. Gabron says, the way he heard it, the tip was essentially to fudge the numbers.

In twenty eighteen, 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 poff to actually making a sustainable business, he chose the letter.

Gabron 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 four million dollars 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

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, its 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 twenty twenty two, after a flurry of interest SoftBank, Temasek and Sequoia India pumped more money into the company, valuing it at four hundred and ten million dollars. But the more funds Gebron raised, the more creative he had to get.

Gebron 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 evaluatestions got higher, Gabron 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 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 six hundred million dollars in the nine months through September of last year. More than three hundred million dollars of investor money was gone. Gabron denied

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 land mass, you have seventeen thousand islands spread out. One key problem was it's really hard to find these farms without E Fishery support, and that in turn gave Gibron 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 and 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 Cabron's favor, a surge and investor interest in impact investing with a particular focus on his part of the world.

At the time that E Fishery was getting a lot of money from globally investors, Southeast Asia was incredibly hot. E Fishery 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 E Fishery 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 US. 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.

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 six dollars each, and that's according to people familiar with the matter. The illusion that Gabron built over thirteen years took less than three months to collapse.

And as for Gabron, at the moment, a lot of his life looks much like it did at the start of E Fishery. 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 they could well be more consequences for him.

This is the Big Take Asia from Bloomberg News. I'm Wanha. This episode was produced by Young Young and Naomi m. It was edited by Patty Hirsch and Emily Cadman. There was additional reporting by Olivia Poe and Forrest Makdar. It was fact checked by Eddie Dwan and mixed and sound designed by Taka Yasuzawa. Our senior producer is Naoli Shaven. Our senior editor is Elizabeth Ponzo. Our deputy executive producer is Julia Weaver. Our executive producer is Nicole Beamster Bower.

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