Malaysia's FashionValet faces corruption probe after US$10 million loss of public funds

Two investment firms linked to the Malaysian government, Khazanah Nasional Berhad and Permodalan Nasional Berhad, are facing public scrutiny after investing RM43.9 million (US$10.2 million) of public funds in ecommerce retailer FashionValet, with a return of just RM3.1 million (US$710k).

Khazanah Nasional Berhad (KNB) is the sovereign wealth fund of the government of Malaysia. As one of the largest sovereign wealth funds in the world, Khazanah was established to invest surplus revenues for the country. Similarly, Permodalan Nasional Berhad (PNB) is one of the largest fund management companies in Malaysia. 

The firm's collective RM43.9 million loss in FashionValet, a prominent local fashion platform, has sparked outcry and has prompted Malaysia's prime minister, Anwar Ibrahim, to order an audit of the country’s nearly US$30 billion sovereign wealth fund.

The recent loss of funds has prompted scrutiny regarding Khazanah's investment choices, particularly as Malaysia remains highly alert to issues of state fund mismanagement in the wake of the extensive 1MDB corruption scandal—a state investment fund that saw former prime minister, Najib Razak, jailed in 2022 for corruption and money laundering for illegally receiving about $10 million from the fund. 

At the heart of the controversy is FashionValet, an ecommerce platform that was launched to promote Malaysia’s high-end fashion retailers internationally. It was led by two of Malaysia's most well-known influencers, Vivy Yusof and Fadzarudin Shah Anuar.

However, the company faced a downturn and ultimately collapsed in 2022, primarily due to challenges posed by the pandemic. As public outcry grew following reports of significant state losses, the founders issued an apology earlier this month, acknowledging their responsibility and admitting they had expanded "too aggressively”.

“We made the mistake of scaling the company in anticipation of continued growth, and when the pandemic hit, we were left exposed,” the couple said in an Instagram post.

 

 

 

 

 

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A post shared by Vivy Yusof (@vivyyusof)

 

However, the Malaysian public weren't satisfied with FashionValet's apology for the loss of public funds, and questioned the company's business practices. Exclusive analysis of online sentiment by media intelligence agency Carma, found that among the parties involved in the controversy, FashionValet received the highest percentage of negative sentiments.

 

Online discussions, primarily from GenZ and millenials (chart below) about Yusof saw critics demand accountability and transparency, alleging mismanagement. Many remained skeptical and criticised Yusof for showcasing her collection of luxury handbags, including rare Hermès Birkins, on social media while Fashion Valet was struggling financially.

“She flaunts her wealth around while Khazanah and PNB’s funds go down the drain,” said X user Khairy Zulfadhli in a post that garnered over 200,000 views.

In response to the public outcry, Malaysia's prime minister Anwar Ibrahim, who also serves as the chairman of Khazanah—a role traditionally held by the prime minister—issued a ‘strict instruction’ in early November for an internal audit of the sovereign wealth fund concerning its investment losses.

The investment loss at FashionValet has also prompted the Malaysian Anti-Corruption Commission (MACC) to investigate, which also launched a probe into Khazanah and PNB minutes before the prime minister’s own announcement.

“This investigation is important because it involves the use of public funds and is an issue of public interest,” said the commission’s chief Azam Baki, in a statement.