New revelations at TAG shed new light on events within a struggling fintech startup

New revelations have emerged about the circumstances of fintech start-up TAG ahead of the suspension of pilot operations and the investigation by the State Bank of Pakistan (SBP), which initially began with the falsification of a document in the request to buy a majority stake in SAMBA Bank.

It’s a developing story and Profit will continue to update details on what happened at TAG as new information surfaces.

A senior source on the board of TAG Innovation (TAG Pakistan) revealed details to Profit regarding the circumstances leading to the suspension of TAG’s pilot project approval and investigation by the State Bank, which initially began when founders Talal Ahmed Gondal and Ahsan Kaleem Khan disclosed to an official at the company that a false document had been submitted to the central bank for the SAMBA bid, and that the State Bank had become aware of it through the investor whose letter had supposedly been forged before being submitted as part of the offer to begin due diligence.

The founders had also been involved in embezzling investors’ money and they were quickly fired from the company as their actions could jeopardize TAG’s entire fintech operations in Pakistan, he says.

On February 10, a letter from Hong Kong-based TTB Partners committing a $45 million investment for the acquisition of SAMBA by TAG Fintech, the Delaware-based holding company of TAG Innovation in Pakistan, had been submitted to Bank of India. ‘State.

According to the source, around February 25, the central bank requested confirmation from TTB Partners of the commitment of $45 million for the acquisition of SAMBA to confirm their participation in the acquisition offer of SAMBA and the amount whom they had hired in accordance with the letter, understood to have been written by Talal due to his fundraising role as CEO, but sent to State Bank by fellow co-founder Ahsan Khan.

On the night of February 27, TTB Partners disavowed the letter that TAG had submitted to the State Bank for the acquisition. Therefore, on February 28, a meeting was called at TAG Innovation Pvt Limited (TAG Pakistan) which was led by a senior company official to assess the consequences of the breach committed and determine responsibilities.

It is imperative to note that the offer to acquire SAMBA Bank was submitted by TAG Fintech Pvt Limited, which is the Delaware-based holding company of TAG Innovation Pvt Limited in Pakistan, the fintech startup in the race to become a electronic money (EMI). The sole head of TAG Fintech in the United States was CEO Talal Ahmed Gondal, who was also the CEO of the Pakistani entity.

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

After the three shareholders, the remaining pool was allocated to employees under the employee stock option plan.

Since the SAMBA bid was submitted by TAG Fintech, any infringement by a TAG Fintech official also affiliated with TAG Pakistan could jeopardize the Pakistani entity which has been trying to obtain the EMI license since 2020 and has raised investments of several millions of dollars.

According to the source on board the fintech startup, an investigation has been conducted to determine responsibility, as offenses such as falsifying official documents could lead to prosecution by the Federal Investigation Agency (FIA) and the SBP. had shown a tendency to involve the FIA ​​in the affair. .

On March 28, the same day of TAG’s internal meeting, Talal Gondal, in his capacity as CEO of TAG Fintech, wrote to the central bank to withdraw the offer to acquire SAMBA and also decided to leave his position. CEO of TAG Innovation.

Subsequently, on March 1, Talal wrote his confession admitting to falsifying documents under his supervision, but pleaded negligence instead of ill intent, and also formally resigned as CEO of TAG Pakistan. Upon stepping down as CEO, Talal was also barred from any involvement in company operations.

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

The source also revealed that following these developments and based on mutual understanding, Talal and Ahsan decided to withdraw funds from the company’s accounts of TAG Fintech as well as TAG Innovation, and by an amount of $350,000 was subsequently transferred by Talal to Ahsan, in addition to another sum. withdrawn by Ahsan Khan due to the payment of salaries to employees, including 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 June 16 letter to investors, Ahsan claimed that Talal withdrew over $1 million from TAG Fintech and TAG Innovation accounts.

The SBP was then informed that in addition to the falsification of the investor letter, the founders, including Ahsan this time, had withdrawn the investors’ money from the company’s accounts and transferred them to personal accounts. .

The source also tells Profit that Ahsan was also later fired from the company for his conduct. The high-ranking source further indicates that the two co-founders were removed with the consent of an unnamed TAG investor.

The SBP has been kept abreast of all the changes because, as a regulator, it needs to be kept informed of changes in key positions in financial institutions. According to the source, the co-founders even decided to dissolve the company at some point due to the fiasco they created.

On March 17, a senior TAG official wrote a letter to the SBP following TAG’s February 28 request to withdraw SAMBA’s acquisition offer. In the letter, Talal’s confessional statement, as well as his resignation letter, were attached.

Looking ahead, the source says the executive chairman of the company has been asked by the SBP to take over the CEO on March 18.

A few weeks later, on April 11, the State Bank suspended TAG’s pilot operations and issued a show cause notice addressed to Talal, CEO of TAG Fintech, and the CEO of TAG Innovation, asking for an explanation “why the ‘action should not be taken against the sponsors, board of directors and management in terms of applicable laws, rules and regulations’ following the submission of a falsified document.

The SBP pointed out in the notice that its findings regarding the falsified investor letter cast serious doubts 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 the CEO of TAG Fintech, Talal, who was also the CEO of TAG Innovation, tampering with the letter to investors was not a bad intention but negligence. Additionally, the money that was illegally withdrawn from TAG Fintech accounts was done based on a mutual understanding by the founders, Talal and Ahsan, and that the rest of TAG Innovation’s management had no visibility into the TAG Fintech accounts.

The SBP was further informed that the two founders had confessed to their actions and had been removed from the company. Since none of these actions were performed on TAG Innovation’s platform, such actions at TAG Fintech in the United States should ideally not affect TAG Innovation’s operations in Pakistan.

The senior board source also says that considering that the two founders were very young, the State Bank was asked to adopt a compassionate attitude towards the actions of the founders who acted with too much enthusiasm.

The source further tells Profit that a senior official at TAG Innovation has since worked to save the company from suffering due to the fiasco created by the founders. “TAG has poached and accumulated very high level human resources and if this business continues to operate, it will continue to provide employment to all of these people,” the source said.

Therefore, in response, SBP has also been informed of the human resource employed by TAG Innovation which should not be adversely affected due to the actions of the founders, especially since they have been removed and were no longer in the management of TAG Innovation.

It was further revealed that after the two co-founders were removed from their C-level roles at the fintech startup, further discrepancies were discovered. It was found that the CTO of the company, Alex Luchianchuk, was never disclosed as a shareholder of TAG Fintech to SBP.

According to another source, under the EMI regulations, shareholders with a 5-10% stake in the holding company are required to undergo a fit and proper test by the central bank. Alex, according to the source, owns 10% of the shares, therefore the non-disclosure of Alex, the TAG CTO, as an SBP shareholder by TAG Fintech CEO Talal Gondal was another breach that he committed.

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

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