SINGAPORE — Last Tuesday (7 Feb 2023), Non-constituency Member of Parliament Leong Mun Wai asked the government with regard to the financial losses suffered by EDBI and Temasek in the recent liquidation of Zilingo, a high-profile online fashion start-up started by Ankiti Bose, a resident in Singapore.

Mr Chee Hong Tat, the Senior Minister of State for Finance, replied to Mr Leong, acknowledging that both EDBI and Temasek did invest in Zilingo, with EDBI in 2018 and Temasek in 2020.

“These investment decisions were made independently by the two entities,” Mr Chee said.

“EDBI and Temasek typically do not comment on their investments in specific companies, or the performance of these individual investments. The Government’s approach is to review the overall performance of EDBI’s and Temasek’s portfolios, rather than the performance of specific investments, to ensure that they are meeting their respective investment mandates.”

In other words, the government would not be commenting on the financial losses suffered by EDBI and Temasek in Zilingo, side-stepping Mr Leong’s questions. However, Mr Chee said that EDBI and Temasek do recognise the inherent risks of investing in startups and do take steps to mitigate these risks.

“Both entities follow industry practice to assess financial and corporate governance risks, such as having a structured due diligence process and engaging the management of investee companies to monitor their business strategy and performance,” he said.

Mr Leong followed up with a supplementary question, “Given the recent events, whether the Temasek and EDB, the review, their due diligence processes, especially when it comes to charismatic founders and whether they plan to engage founders and the board more regularly to ensure good governance.”

In response, Mr Chee said, “I think we have explained this both in the House and also on other occasions, that for them to say, for example, they do have a process to assess the risk of the various companies that are invested and they will also, as part of this process, engage the board and the management of these companies regularly and for the process to work well.”

“I think it’s important, and I hope Mr Leong agrees with me on this point, that we have to pay attention to what is the performance of the overall portfolio and not just on specific investments, because on specific investments there will be some that will make money and there will be some that will not make money.”

“Serious financial irregularities”

Last April, news broke that Zilingo’s CEO Ankiti Bose was fired over irregularities found in her company’s accounting.

“Following an investigation led by an independent forensics firm that was commissioned to look into complaints of serious financial irregularities, the company has decided to terminate Ms Ankiti Bose’s employment with cause, and reserves the right to pursue appropriate legal action,” the company issued a public statement last May.

During fundraising last year, investors began questioning its finances as part of the due diligence process.

It led to Temasek and Sequoia Capital starting an internal investigation into the financial practices of the company. It was found that, in fact, the company had not filed any annual financial returns since 2019.

Investigators also questioned the way Zilingo had accounted for transactions and revenue. When the fracas started, Temasek pulled back one of its staff who was sitting on the board of Zilingo.

In addition to questions about Zilingo’s accounting practices, it was found that payments to several service providers of more than US$7 million were quietly signed by Ms Bose without the knowledge of other senior executives. The payments were said to have gone to about five IT and consulting firms.

And according to insiders, it wasn’t clear what services they delivered. The investigators did not identify whether there were links between the Zilingo payments and the CEO. Such a task would require access to bank accounts, which was beyond the scope of the forensic investigation led by the internally appointed investigating team.

Still, despite Mr Chee’s assurance that EDBI and Temasek do “engage” the management of investee companies to monitor their performance, somehow they weren’t able to spot the “serious financial irregularities” in Zilingo until it was too late.

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