The State Bank of Pakistan, the South Asian country’s central bank, has ordered fintech Tag to “immediately” refund all funds to customers citing violations of legal requirements and “other concerns”, raising existential questions about the future of the startup.
The regulatory action follows a months-long investigation into Tag, which offers banking and financial services to users in Pakistan. The startup has been accused of falsifying documents to the central bank, according to an investor letter obtained by londonbusinessblog.com. the central bank did not outline (PDF) which Tag had violated legal rules, but set an August 19 deadline for the refund.
Tag co-founder Ahsan Khan accused the startup’s other co-founder, Talal Gondal, of falsifying 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 become aware of Talal Ahmad Gondal’s unscrupulous and unprofessional conduct in running TAG since March 31, 2022 (and had suspicions and concerns about his conduct long before that, and I resigned from TAG Pakistan’s Advisor/COO post as of April 1, 2022 when I learned about Talal’s case.),” Khan wrote in the June 16 letter obtained by londonbusinessblog.com.
“Right now I am facing illegal actions by the other founders, Talal Ahmad Gondal and Alexander Lukianchuk, who have attempted to oust me as founder and shareholder of TAG Fintech on completely fabricated grounds. It appears that this action was taken by both in concert to shift the blame and liability to me alone, which is quite an unfortunate turn of events as I have consistently acted as the wise, prudent and prudent founder since the beginning of LABEL. It is therefore imperative that our investors, who have invested valuable sums in TAG for the benefit of a bona fide business and return on their investment, are made aware of the alarming state of affairs at the moment.”
Tag is one of the fastest growing startups in Pakistan. It was valued at $100 million in its seed funding round last September. The startup counts Liberty City Ventures, Canaan Partners, Addition and Mantis among its donors.
Gondal did not immediately respond to a request for comment.
Read further: Local journalist Taimoor Hassan has been reporting on Tag’s problems for weeks.