Founder of Indonesian e-commerce startup, GrabToko, Yudha Manggala Putra, has been arrested by local police on the charge of money laundering and online scamming.

GrabToko (not related to Grab or Tokopedia) is an e-commerce startup that sells new iPhones and Android smartphones at large discounts.

However since the startup's launch, it has only sent 9 buyers their products, and did not deliver the rest of the phones ordered by hundreds of other customers.

According to the police, a total of 980 people ordered products from GrabToko, totalling over $1.2 million in losses.

Despite not delivering the products, the company did aggressive sales tactics to continuously attract customers using billboards, TV advertisements, and online marketing.

GrabToko even employed a customer service staff of 6 people that were solely focused on calming customers who were filing complaints regarding their undelivered products.

A week prior to his arrest, Putra mentioned in the company's Instagram account that GrabToko was unable to deliver the products because an investor had embezzled payments from its customers.

The police however, suspect that Putra had invested the customers’ payments in cryptocurrency.

GrabToko's website and social media accounts have now been taken down.