The State Bank of Pakistan, the South Asian nation's central bank, has ordered fintech Tag to "immediately" refund all funds to customers citing violation of regulatory requirements and "other concerns," posing existential questions on the startup's future.
The regulatory action follows a months-long probe into Tag, which offers banking and financial services to users in Pakistan. The startup has been accused of forging documents to the central bank, according to an investor letter obtained by TechCrunch. The central bank did not outline (PDF) which regulatory rules Tag had violated, but set a deadline of August 19 for the refund.
Ahsan Khan, co-founder of Tag, accused the startup's other co-founder, Talal Gondal, of forging documents to the central bank; upon discovery of the fraudulent act the bank suspended the startup, he wrote in a letter to investors in June.
"I had come to know of Talal Ahmad Gondal's unscrupulous and unprofessional conduct while running TAG since 31st March 2022 (and had suspicions and concerns about his conduct long before then, and I resigned from Advisor/COO position of TAG Pakistan as of 1 April, 2022 when I came to know about Talal's case.)," Khan wrote in the letter dated June 16, which was obtained by TechCrunch.
"At present, I am facing illegal actions by the other founders, Talal Ahmad Gondal and Alexander Lukianchuk, by which they have attempted to oust me as a founder and stockholder in TAG Fintech on wholly fabricated grounds. It appears this action has been undertaken by both of them acting in concert in order to deflect blame and liability to me alone, which is quite an unfortunate turn of events as I have consistently acted as the sane, prudent and cautious Founder since the inception of TAG. It is therefore imperative that our Investors, who have invested valuable sums into TAG for the purpose of a bonafide enterprise and return on their investment, are made aware of the alarming state of affairs at present."
Tag is one of the fastest growing startups in Pakistan. It was valued at $100 million in its seed financing round in September last year. The startup counts Liberty City Ventures, Canaan Partners, Addition and Mantis among its backers.
Gondal did not immediately respond to a request for comment.
Further reading: Local journalist Taimoor Hassan has been reporting on Tag's troubles for weeks.