Gully Labs, a D2C sneaker brand that rose to national attention after appearing on Shark Tank India, has reported a loss of nearly ₹2 lakh following alleged fraud by a newly recruited customer‑support executive. The incident highlights internal control risks as Indian startups scale operations and expand teams.
How the fraud unfolded
Founded by Arjun Singh and Animesh Mishra, Gully Labs built its reputation on premium, street‑culture inspired sneakers and grew visibility after its television appearance. The company says the fraud occurred within days of a customer service executive joining the team.
Using backend access, the employee allegedly created 100% discount codes — far beyond the typical 10–20% concessions support staff are authorised to issue to retain customers or resolve complaints. These full‑discount vouchers marked orders as “paid” in the system, prompting warehouse dispatches despite no payment being received.
According to the company, sneakers valued at about ₹2 lakh were shipped out. After delivery, the employee reportedly resigned.
Recovery attempts and legal complications
Founders approached the former employee and secured the return of roughly half the products, the company says. Several items, however, were claimed to have been used and could not be recovered.
When Gully Labs sought recovery or compensation for the remaining goods, the ex‑employee is reported to have issued legal notices alleging harassment. The notices introduced a legal dimension that complicated a swift resolution and forced the startup to allocate management time and resources to the dispute.
Strengthening controls
In response, Gully Labs has tightened backend security and access permissions and implemented closer monitoring of discount issuance and administrative actions. The company says these measures aim to prevent future misuse of promotional codes and reduce single‑point access risks.
For many early‑stage D2C firms, rapid hiring and informal processes can create vulnerabilities. Startups increasingly recognise the need for role‑based access control, approval hierarchies, audit logs and periodic system reviews as part of basic governance.
Wider lessons for the startup ecosystem
While the monetary loss may be modest relative to larger brands, for a growing startup it represents a meaningful operational setback, potential morale impact and diversion of leadership focus. Industry observers note that as businesses scale, reliance on personal trust should give way to documented controls and standard operating procedures.
The Gully Labs case underscores the trade‑offs that come with accelerated visibility — such as that gained from Shark Tank India — and rapid scaling. Strengthened internal frameworks now can help mitigate such risks and support sustainable growth for emerging D2C brands across India.
