New revelations shed new light on events within troubled fintech start-up TAG

New revelations have come to the fore regarding the circumstances of fintech startup TAG ahead of the suspension of its pilot operations and the investigation by the State Bank of Pakistan (SBP), which initially started with the tampering with a document in its application to buy a majority stake in SAMBA Bank.

This is a developing story and Profit will continue to update details of what happened at TAG as more information emerges.

A senior source at TAG Innovations (TAG Pakistan) board revealed details to Profit regarding the circumstances leading to the suspension of TAG’s pilot approval and investigation by the State Bank, which initially began when founders Talal Ahmed Gondal and Ahsan Kaleem Khan disclosed to a company official that a forged document had been submitted to the central bank for the SAMBA bid, and that the State Bank had learned about it through the investor whose letter had allegedly been processed before submission as part of the offer to start due diligence.

The founders had also been involved in embezzling investor money and they were immediately removed from the company because their actions could compromise TAG’s entire fintech business in Pakistan, he says.

On February 10, a letter from Hong Kong-based TTB Partners committing a $45 million investment for SAMBA’s acquisition of TAG Fintech, the Delaware-based holding company of TAG Innovation in Pakistan, was sent to the state bank.

According to the source, around February 25, the central bank sought confirmation from TTB Partners of the $45 million commitment for the SAMBA acquisition to confirm their participation in the SAMBA acquisition bid and the amount they had committed according to the letter, understood to have been written by Talal due to his fund-raising role as managing director, but sent to the state bank by the other co-founder Ahsan Khan.

On the night of 27 February, TTB Partners rejected the letter TAG had sent to Statsbanken for the acquisition. A meeting was therefore convened on 28 February at TAG Innovation Pvt Limited (TAG Pakistan) which was chaired by a senior corporate official to assess the consequences of the offense committed and fix the liability.

It is important to note that the bid to acquire SAMBA Bank was submitted by TAG Fintech Pvt Limited, which is the Delaware-based holding company of TAG Innovation Pvt Limited of Pakistan, the fintech startup in the race to become an Electronic Money Institute ( EMI). ). The only official of TAG Fintech in the US was CEO Talal Ahmed Gondal, who was also the CEO of the Pakistan unit.

According to another source in the company, no other official of TAG in Pakistan was associated with TAG Fintech in the US in any official capacity except CEO Talal. Although co-founder Ahsan Khan has a stake in TAG Fintech as well as Alex Luchianchuk, CTO of TAG in Pakistan.

After the three shareholders, the remaining pool was allocated to employees under the option scheme for employees.

Since the SAMBA bid was submitted by TAG Fintech, any offense committed by any TAG Fintech official who is also associated with TAG Pakistan could compromise the Pakistani entity that has been trying to secure the EMI license since 2020 and has raised multi-million dollar investments .

According to the source on board the fintech startup, an investigation was conducted to fix the liability because offenses like tampering with official documents could risk action from the Federal Investigation Agency (FIA) and the SBP had shown an inclination to involve the FIA ​​in the case.

On March 28, the same day as the internal meeting of TAG was held, Talal Gondal, in his capacity as CEO of TAG Fintech, wrote to the central bank to withdraw the bid for the SAMBA acquisition and also decided to resign as CEO of TAG Fintech. TAG Innovation.

Subsequently, on March 1, Talal wrote his confession, admitting to documented tampering under his watch, but pleaded negligence rather than ill intent, and also officially resigned as managing director of TAG in Pakistan. After stepping down as CEO, Talal was also stopped from any involvement in the company’s operations.

Meanwhile, Talal decided to hand over the helm of all operations to Ahsan Khan who took over as CEO after Talal’s resignation.

The source also disclosed that following this development and based on mutual understanding, Talal and Ahsan decided to withdraw funds from the company accounts of TAG Fintech as well as TAG Innovation and subsequently an amount of $350,000 was transferred by Talal to Ahsan, in addition to a other sum withdrawn by Ahsan Khan on account of payment of salaries to employees which included payments to his brother Tayyab Kaleem Khan.

The amount of $350,000, which Talal claims Ahsan illegally withdrew from the TAG Fintech account, was revealed to have been transferred by Talal himself to Ahsan. On the other hand, in his letter to investors on June 16, Ahsan claimed that Talal had withdrawn over $1 million from TAG Fintech and TAG Innovation accounts.

The SBP was then told that in addition to falsifying the investor letter, this time founders including Ahsan had withdrawn investor money from company accounts and moved it to personal accounts.

The source also tells Profit that Ahsan was also later removed from the company for his performance. The senior source further says that both co-founders were removed with the consent of an investor in TAG, whose name was not disclosed.

SBP was kept in the loop about all the changes because as a regulator, it needs to be kept informed about changes in key positions in financial institutions. According to the source, the co-founders had even decided to disband the company at one point due to the failure they had created.

On March 17, a senior official at TAG wrote a letter to SBP as a follow-up to TAG’s February 28 request to withdraw its bid for the SAMBA acquisition. In the letter, Talal’s confession statement and the letter of resignation were attached.

In advance, the source says that the managing chairman of the company was asked by SBP to take on additional responsibility for the managing director on 18 March.

A few weeks later, on April 11, the state bank suspended the pilot operations of TAG and issued a notice to Talal, CEO of TAG Fintech, and to CEO TAG Innovation, seeking an explanation “as to why action should not be taken against the sponsors, the board and management in accordance with applicable laws, rules and regulations” after submitting a manipulated document.

The SBP highlighted in the announcement that its findings with regard to the tampered investor letter cast serious doubt on the integrity, honesty and reputation of the sponsors, board and management.

According to the source, in response to the SBP notice, the central bank was informed that TAG Fintech CEO Talal, who was also the CEO of TAG Innovation, processing the investor letter was not negligence but negligence. Furthermore, the money illegally withdrawn from TAG Fintech accounts was made based on the mutual understanding of the founders, Talal and Ahsan, and that the rest of the management of TAG Innovation had no visibility into TAG Fintech accounts.

SBP was further informed that both founders had confessed to their actions and were expelled from the company. Because none of these actions were taken on TAG Innovation’s platform, such actions at TAG Fintech in the US should ideally not affect TAG Innovation’s operations in Pakistan.

The high-ranking source on the board also states that, considering that both founders were very young, Statsbanken was asked to take a compassionate stance towards the actions of the founders who acted overenthusiastically.

The source continues Profit that a senior TAG Innovation official has since tried to save the company from suffering due to the failure created by its founders. “TAG has poached and accumulated highly advanced human resources and if this company continues to operate, it will continue to provide employment to all these people,” the source said.

Therefore, in response, the SBP was also told that the human resources employed by TAG Innovation should not be adversely affected due to the actions of the founders, especially since they were removed and were no longer in the management of TAG Innovation.

It was further revealed that after both co-founders were removed from C-level positions in the fintech startup, some more irregularities were discovered. It was found that the CTO of the company, Alex Luchianchuk, was never disclosed as a shareholder of TAG Fintech to the SBP.

According to another source, as per the EMI regulations, shareholders with 5-10% stake in the holding company are required to clear the fit and proper test by the central bank. Alex, according to the source, owns 10% shareholding, therefore the non-disclosure of Alex, TAG CTO, as a shareholder to SBP by TAG Fintech CEO Talal Gondal was another offense committed by him.

Profit apologizes that this version could not be added to the original story, but will update the story with all versions as they appear