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 scene. There is a state that keeps trying to start one.
Now connect the machine to the scandals, because some of this public money, including pension money, has flowed into foreign accelerator programs operating in Malaysia. One global program, backed in part by that same pension fund, deployed roughly US$2 million here across 19 tiny checks over about a year and a half, and once you net out the program fees the real number is around 40 percent less. Then the global head office reshuffled its strategy, folded countries together, and Malaysia no longer even has a standalone local program. To be clear, nobody did anything wrong there. A global program runs its playbook, deploys small, and optimizes for its own portfolio. Malaysia is one line in a very large spreadsheet.
That is the point. That is the whole point. The local public money keeps flowing to players for whom Malaysia is a line item. A foreign startup that sent the growth story to Indonesia. A foreign accelerator that answers to a global strategy. A fund of funds that returns pennies on the ringgit and gets a new name. In that entire chain, is there anyone whose actual job, whose actual mission, is to build something durable in Malaysia and stay to see it through? The money shows up, the photo gets taken, everyone moves on, and the country is left holding the losses and waiting for the next program launch.
Malaysia does not have a capital problem. It has thrown capital at this for two decades. It has an alignment problem. It keeps giving the money to people who are, in the most literal sense, just passing through.
Four. An island near Singapore
Which brings me to Forest City, because the Network School story is the cleanest version of the whole pattern, and it just ended in the most telling way possible.
Network School was founded by Balaji Srinivasan, the former Coinbase executive and the leading prophet of the network state, the idea that you can build a new society out of people who share beliefs online rather than a shared piece of land. He set up a real-world version in Forest City, Johor: around 400 residents from more than 70 countries, paying US$1,500 a month to live together, code together, and talk about digital sovereignty.
Start with the smallest detail, because it tells you almost everything. From the very beginning, they did not call it Malaysia. The announcement called it, and I am quoting, an island near Singapore. That is how it was sold, over and over. Not Johor. Not Malaysia. The country they were actually living in barely got a mention. They borrowed the neighbor’s reputation and left the landlord’s name off the door. Sit with that for a second. If you will not even say the name of the country you have chosen to live in, you have already told everyone exactly how deep your roots go. Malaysia was never the home. It was the address on the invoice.
Then came the controversy. Viral accusations started swirling, and when they did, immigration and the local council did exactly what they should do: they inspected. Whatever you make of the specific claims, every government on earth, when a public accusation lands on its doorstep, is obligated to look into it. That is not persecution. That is a government doing the one job it owes its own citizens.
And here is the part every foreigner here, myself included, needs to hear plainly. When you live in someone else’s country, you are a guest. You do not get to decide which of their rules are beneath you. The permits, the inspections, the paperwork: they are the price of being allowed to build there. I get the frustration, genuinely. I am a foreigner in this region myself, a founder and an investor, and I know exactly how it feels when the forms make no sense and something that should take five minutes takes five weeks. That friction is real and it can be maddening.
But the response here was an ultimatum, then a shutdown order from the council, and then, while the dust was still settling, a signed deal with another jurisdiction, expedited visas included. If your answer to one inspection is to threaten the country and have a replacement ready by dinner, you were never really here in the first place. You were parked. And the next destination is not a new home either. It is just the next island near somewhere.
I will say this too, as someone who has to make judgment calls like these myself: the ultimatum was a bad tactic even on its own terms. You do not win a dispute with a sovereign by publicly threatening to walk out. You win it by fixing the problem, by working with the country, by delivering value rather than just extracting it. Leading with the threat did not show strength. It showed that the exit was already the plan.
Was there some benefit to Malaysia while they were here? Maybe, at the margins. A lot of sharp, ambitious people in one place, some knowledge rubbing off on the small fraction who were local, a possible magnet effect for others to come and look around. I will not pretend those are worth nothing. But I do not believe for one second that any of that was the actual intention. Knowledge transfer to Malaysians does not seem to have been the mission. The mission, as far as I can tell, was a cheap base with a nice view of Singapore and rules light enough to ignore. Malaysia was the backdrop, not the product. And the instant the backdrop asked them to comply with the rules, they went and found a new backdrop.
Five. Back the ones who already decided to stay
So here is the through line I want to leave you with, because it is much bigger than one commune. Malaysia has a long, expensive habit of rolling out the carpet for the passerby: the person who comes to extract rather than to build something that stays, the fund that flies in, deploys, and flies out, the foreign accelerator lured in with public money that quietly folds its tent when the global theme changes, the brand name that gets the ministerial welcome and the photo op.
And meanwhile, the people who actually stayed get almost none of it. I say this as a foreigner who did stay. There are people in this country who were not born here, who came and put down real roots, who built companies here, hired locals, mentored founders, invested in founders, and made the boring, unglamorous ten-year bet on this place with no exit lined up in their back pocket. Those people do not get a memorandum signed within hours. They do not get the minister at the airport. They queue up, fill in the same forms as everyone else, and wait.
That is upside down. There is dramatically more machinery in this system for luring a brand name than for backing the ones who have been loyal and built roots. And you do not build anything durable by courting the people most ready to leave. You build it by backing the ones who already decided to stay.
Right now, as I write this, the public institutions are putting hundreds of millions more into the semiconductor push. That could be the best decision they make this decade, or it could be the same machine with a new logo. The difference will not be the size of the check. It will be whether, this time, the money flows to the people who are staying, and not to the ones already halfway to the next island.
This one annoyed some of you, I am sure, and it should have. If you run one of these funds, or if you quietly built something real here and watched the welcome party go to a brand name instead, my inbox is open. Come show me what you built.
This piece accompanies this week’s episode of SEA of Startups. Real. Raw. Relatable. Listen on Spotify, Apple Podcasts, or YouTube, and subscribe to the newsletter at seaofstartups.substack.com.
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