Over the past few weeks, three Malaysia stories hit the news that, on the surface, have nothing to do with each other. A government pension fund answered in Parliament for nearly RM200 million lost in a fish farming startup that turned out to be a fraud. A celebrity founder and her husband sat in a courtroom over money that came from two of the biggest state funds. And a quasi-crypto commune in Forest City had its license pulled by the local council and announced it was leaving. A fraud, a trial, and a controversy. Three different casts, three different genres. And underneath all three sits one uncomfortable pattern about how Malaysia spends its public money and who actually ends up on the receiving end of it. Here it is in one line, and the rest of this post is me proving it: when the Malaysian state goes looking for the future, it keeps handing its money and its land to people who are just passing through. And the ones who stayed, who put down roots and built something here, are the ones it keeps overlooking. One. Four audit firms, and nobody counted the feeders Start with the pension fund, because this is the one that should make you angriest, and not for the reason you think. The fund is KWAP. It manages the retirement savings of Malaysian civil servants: teachers, nurses, clerks, the people who keep the country running. About RM195 billion under management, more than RM8 billion in investment income last year. A serious, professional institution. In July 2023, KWAP put nearly RM200 million, call it US$47 million, into eFishery, the Indonesian startup that made internet-connected fish feeders and sold itself as the future of aquaculture in Southeast Asia. You already know how this ends. eFishery was one of the biggest startup frauds this region has ever produced. The company kept two sets of books. It claimed roughly 400,000 smart feeders deployed in the field. The real number was about 24,000. The fleet was inflated more than fifteen times over, and revenue was inflated to match. The founder was sentenced to nine years in an Indonesian prison, since trimmed to six on appeal. The story is back in the news because the Prime Minister stood in the Dewan Negara this week to answer for it, and the anti-corruption commission has opened a probe. The easy story, the one a lot of people wanted, is that somebody was lazy or asleep at the wheel. I do not think that is what happened, and the truth is far more useful. KWAP did not skip the diligence. It was part of a consortium that included SoftBank and Temasek, serious money with serious teams. Between them, the investors hired four separate audit and diligence firms: PwC, Grant Thornton, EY, and KPMG. They hired six more firms to survey the market and validate eFishery’s position in it. They hired Kroll, the corporate investigations outfit, to run background checks on the founders. That is millions of dollars of the most reputable professional diligence money can buy. Every single one of them missed it. Because all of that diligence was done on paper. Financial statements verified, documents cross-checked, management interviewed, the numbers in one data room matched against the numbers in another. As far as I can tell, nobody got in a car and drove out to the fish farms to count the feeders. If a single one of those firms had spent one week doing what any private equity analyst is taught on day one, go to the site, walk the floor, talk to the actual customers, they would have found 24,000 machines where the company promised 400,000. The fraud was not hiding in the accounts. It was sitting in plain sight in the fields, where nobody bothered to look. Every founder and fund manager reading this should burn that in: diligence on documents only tells you the documents are consistent. It does not tell you the documents are true. The cheapest, most boring check in the entire toolkit, physically going and looking at the thing, is the one nobody did. Two fairness notes. RM200 million against a RM195 billion fund is a rounding error, one tenth of one percent. Nobody’s pension is at risk, and when you hear the political noise, keep it in proportion. This is embarrassing, not an emergency. But it is exactly because the money was small that the failure matters. This was not a bet that went wrong. It was a bet that was never really examined, waved through on the strength of who else was in the round. SoftBank is in, Temasek is in, the auditors signed off, so we are in. That may pass in public markets. In private investing it is not investing, it is following. And when a Malaysian pension fund follows a crowd of foreign funds into a foreign fraud, you have to ask the question this whole post is about: what did any of it have to do with building Malaysia? Two. They bought the face, not the business I am going to be careful here, because this is a live trial. The founders have pleaded not guilty, and I am not here to convict anyone from a microphone. Everything about the alleged conduct is exactly that, alleged, and the courts will decide in due process. But the investment itself, the money going in and the money coming out, is a matter of public record, and that part is fair game. The company is FashionValet, the Malaysian fashion e-commerce startup founded by Vivy Yusof and her husband. Vivy was, and is, one of the most recognizable entrepreneurs in the country, a genuine influencer before that word got cheap, with a modest wear brand, dUCk, that people genuinely loved. She became the face of a certain kind of Malaysian success story. In 2018, two of the largest state funds invested: Khazanah put in RM27 million and PNB put in RM20 million. Call it RM47 million of public money into a homegrown fashion brand. Here is the number that should stop you. When the two funds eventually sold their stakes, they got back a combined RM3.1 million. A loss of roughly RM44 million, confirmed by the Ministry of Finance. Startups lose money, understood. But the losses were visible before anyone wrote a check. FashionValet lost money every single year it operated, and the losses grew from a few hundred thousand ringgit to more than RM10 million a year. Six straight years of red ink, and the funds looked at that and invested anyway. So the obvious question is why. I was not in the room, and I arrived in Malaysia around that time without the context to judge it then. But I do not think the honest answer has much to do with the business. I think the honest answer is worse, because it is a pattern rather than a one-off. They did not buy a business. They bought a face. A narrative, a following, the magazine covers, the idea that if you back the most famous young founder in the country, some of that shine rubs off, and the national funds get to say they are backing national icons. It feels modern. It ticks the marketing boxes. It photographs well. But an icon is not a business model, and a following is not a balance sheet. When the thing you actually bought is a personality, you bought a fragile asset, because the moment public sentiment turns, and in the influencer game it always eventually can, your investment turns with it. And here is the detail that tells you this is a real lesson and not just hindsight dressed up as insight: Khazanah itself, after the whole thing blew up, publicly warned about the risk of what it called icon-driven businesses. The fund said the quiet part out loud. Betting on personality is a structural mistake. Now put the two stories side by side, because they rhyme. In eFishery, the funds bought a foreign founder’s story and never checked the fields. In FashionValet, they bought a local founder’s story and never respected the profit and loss statement. One was a fraud, one was just a bad business, and those are very different things. But the investor mistake underneath both is the same: fund the narrative, skip the boring verification that would have told you the narrative was hollow. In both cases, public money went in on the strength of a name, not a capability. Three. Three names, one machine Two bad deals is just two bad deals. The reason this is a post and not a shrug is that these are not isolated checks. This is the machine working the way it has always worked. For more than twenty years, the government has tried to build a venture capital scene by pouring public money into funds and programs. Walk the track record. MAVCAP, the state venture arm going back to the early 2000s: over half a billion ringgit committed over the years, and by last reporting somewhere around RM200 million and change had come back. Roughly 38 sen home for every ringgit out. Allow for liquidity and unrealized positions, it is still a very slow, very official way of setting money on fire, and the local venture scene did not become self-sustaining on the back of it. Then came 2020 and Penjana Kapital, a fund of funds worth hundreds of millions, launched to kickstart the sector after the pandemic. Big launch, big numbers. Years later, remarkably little of the money had actually been deployed. The government, the local investors, and the foreign partners all wanted different things, and the apparatus seized up. And after two stalls, it did not stop. It rebranded. The prior attempts were consolidated under the sovereign fund and relaunched in late 2024 under a new name, with a new commitment of capital, as part of an even bigger government mobilization effort. Fresh name, fresh logo, fresh press release, fresh faces. MAVCAP, then Penjana, then the new entity. Three names, one machine, more than two decades. Fairness again, because it matters: real managers got their first checks from these vehicles, some very good local companies were backed, and many of the people involved are smart and sincere. The new iteration is too early to judge, and I genuinely hope it does better. But the machine, as a machine, has not built the thing it was built to build. There is still no self-sustaining venture
