Pakistan’s central bank instructs startup Tag to refund clients

The State Bank of Pakistan, the country’s central bank, has instructed fintech firm Tag to “immediately” refund all customer cash due to “other issues” and regulatory violations, raising existential concerns about the startup’s survival.

The regulatory action comes after a months-long investigation into Tag, which provides customers in Pakistan with banking and financial services. According to an investor letter that TechCrunch was able to receive, the firm has been charged with falsifying paperwork submitted to the central bank. The central bank set a deadline of August 19 for the return but did not specify which legal requirements Tag had broken (PDF).

In a letter to investors in June, Tag co-founder Ahsan Khan accused the business’s other co-founder Talal Gondal of falsifying paperwork to the central bank; after the fraudulent act was discovered, the bank banned the startup.

“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.”

One of Pakistan’s startups with the quickest growth is called Tag. During its seed financing round in September of last year, it received a $100 million valuation. Among the investors in the startup are Liberty City Ventures, Canaan Partners, Addition, and Mantis.