Scams Are Ruining Pakistan’s Digital Economy

It took Samain Abid, 26, nearly two years to scrape together the 120,000 rupees ($454) he needed to buy a PlayStation 5. Before he bought it, he combed through reviews and asked friends for advice. Finally, in January last year, he placed an order with ZipTech, a gaming equipment company that had by then become the supplier of choice for Pakistan’s gamers.

The company’s appeal was clear. It was cheaper than the competition, offering longer delivery times in exchange for below-market prices on imported goods. It also came highly recommended in the Facebook groups that make up the core of Pakistan’s ecommerce industry. It even had a celebrity endorsement from Junaid Akram, a comedian and streamer with more than 924,000 subscribers on YouTube. And finally, it had a charismatic owner, Muhammad Hassan, known in the community as Major Zippy.

Zippy was a huge figure in online gaming circles. In the Pakistani PC Gamers Facebook group—an online community with more than 130,000 members—“people trusted him blindly,” Abid says. “He was philanthropic, selling at fair prices, giving away free laptops and PlayStations, almost like a messiah.”

But a year after he ordered it, Abid’s PlayStation still hasn’t arrived. At least 260 people, according to a spreadsheet circulating in the Pakistani PC Gamers group, claim to have been scammed by ZipTech, to a total of 67 million rupees—around $290,000. Zippy, too, has disappeared. Calls to Major Zippy’s cell phone went unanswered, as did emailed requests for comment. “It was a huge betrayal,” Abid says. “He gave us hope and then took it away.”

The scandal has been gutting for many in Pakistan’s gaming community, but it’s also demonstrated how little attention the authorities pay to the security of digital spaces. Facebook groups and peer-to-peer sales over social media and messaging apps dominate in Pakistan’s fast-growing but largely informal online economy. The pandemic—and ongoing economic turmoil in the country—has moved traditional sellers online and led to more people looking for ways to make a fast buck. But as ecommerce has grown, so too have scams, frauds, and incidences of apparent mismanagement that have left customers out of pocket, threatening the integrity of the ecosystem.

“Everyone is hungry—on both sides. The scammers, and the scammed,” says Meenah Tariq, cofounder and CEO of accounting app Metric. “We are existing in a state of dread.” 

For years, Pakistan’s digital economy has seemed on the cusp of dramatic growth. The country’s young, increasingly online population has attracted a flurry of startups and VC investment looking for opportunities to convert a largely cash-based, informal economy into a digital one. Studies indicate that nearly 60 percent of Pakistan’s economy is informal, with the majority of local companies undocumented and outside the tax net.

However, formal ecommerce platforms haven’t gained a great deal of traction in Pakistan because most transactions are cash-based. Studies estimate that nearly 95 percent of ecompanies in Pakistan receive payments for their online orders via cash-on-delivery—and a large unbanked population makes the transition to digital payments only more difficult. Smaller sellers also prefer to stay outside of the tax system, which means continuing to transact in cash rather than moving on to digital payment systems.

“A large percentage of merchants prefer to stay in the gray economy and not come into the tax net and so they don’t adopt online payment options,” says Misbah Naqvi, cofounder of i2i Ventures, a VC firm investing in early-stage startups in Pakistan. “This impacts the growth of the ecommerce ecosystem in Pakistan.”

During the pandemic, a lot of sellers did move online, but they often did so on social media and messaging platforms, arranging deals directly with customers. Facebook groups such as Packr, for instance, began to thrive when the country placed an import ban on luxury items in May 2022, allowing customers to sidestep hefty customs and import duties by getting imported products shipped to their doorstep via passengers returning from abroad. 

This has meant that Facebook communities have an outsize influence on how people buy online in Pakistan, and who they buy from.

This is why, when Usman Sheikh, one of the moderators of the Pakistani PC Gamers Facebook group, woke last April to a barrage of angry emails from people demanding to know why their ZipTech orders hadn’t been delivered, he felt responsible. The messages poured in for weeks. He tried to reply to them all, sitting at his computer from 6 am to 10 pm.

Sheikh, 24, joined the group when it launched. He was 13 at the time, and grew up on a steady diet of video games, starting with pirated CDs bought in neighborhood stores in Lahore. When internet bandwidth in Pakistan improved, he became an avid online gamer, playing Counter-Strike: Global Offensive with gamers from different corners of the world. “I actually made more friends through games than I did in real life,” Sheikh says.

Major Zippy joined the Facebook group in April 2019 as a Fortnite streamer with 8,000 subscribers on YouTube. In June 2020, at the height of the pandemic, he made the transition to selling new and refurbished gaming CPUs.

The group ran a kind of crowdsourced verification process for sellers, looking at buyer reviews before giving anyone an endorsement. “There was a level of trust within the community,” Sheikh says. “We worked hard to build rules and guidelines, tried our level best to implement them.” 

Zippy seemed to meet the bar. And, he was quite ostentatiously a nice guy. In December 2020, a member of the Facebook group, a 16-year-old girl, told members she had lost her father and was trying to support her family by working as a graphic designer. But she didn’t have a PC. Zippy stepped in and built her a computer with custom specifications that could support graphic design software, all for free.

Members of the group say they started to get suspicious when orders took longer and longer to arrive. Sometimes, they say, it seemed as though he would deliver only one set of orders after he’d received payment for three or four others.

Zippy seemed to be doing well—on his Instagram account, he was posting pictures of cars that he had apparently bought, including a 2018 Mercedes and a 2021 MG HS. Although, oddly, a later search of Pakistan’s publicly available car registration database shows that the vehicles were registered under a different name—Syed Junaid Ahmed.

The last time Zippy posted to Instagram was in April 2022—a four-paragraph-long apology note saying he was sorry for not delivering orders on time, and that he would make it up to everyone. Then, he vanished.

Sheikh says he’s still struggling to understand why Zippy did what he did. “If he really wanted to leave, why didn’t he just disappear or vanish right off the bat? Why was he putting up long apology posts?” he says. “Was he always a bad guy? Or was he a good guy who saw money and went rogue? I suppose we will never know.”

But scams and swindles have proliferated in step with the growth of informal online businesses in Pakistan. Last year, hundreds of Pakistani women were scammed by a Karachi-based entrepreneur, Sidra Humaid, who ran online committees—a method of saving money by pooling a specific amount each month. After collecting nearly $2 million, Humaid announced that she had “no means to pay off her committees.”

In 2020, over 100,000 people in Pakistan’s Khyber Pakhtunkhwa province were robbed of 5.6 billion rupees ($19 million), according to news reports. Scam victims were promised high profits—nearly 13 percent—on investments by a Peshawar-based online investment company, only to have them disappear without a trace in November that year. 

Tariq, the tech founder, says that she thinks the rise in scams is down to a combination of economic stress and the fact that there’s rarely any recourse for victims. About a month ago, Tariq heard about yet another scam: menacing loan sharks prying on the unsuspecting working-class women borrowing money to make ends meet. 

“These women who got scammed knew what the risk was. They probably knew they were getting ripped off, but there’s really no other avenue available,” she said. “And they were not taking loans for frivolous reasons or to buy clothes or whatever. They were probably taking them because someone in their house is sick. So it’s that desperation, that exploitation, that is absolutely booming right now. We are also seeing it in the startup ecosystem, where startups are getting bad terms by pretend investors.”

And yet, Tariq says, no one is banking on law enforcement to step in. “I don’t think the common person, even for a minute, considers going to court,” she says. “And I think that’s what scammers are banking on, too. They know no one is going to take them to court.”

The ZipTech scandal might have some kind of resolution, however. 

One member of the Pakistani PC Gamers group, Khizer Ali Khan, happens to be a lawyer. After reading accounts from angry ZipTech customers in April, Khan got in touch with a barrister friend, Khaleeq Zaman, and suggested that they start legal action. They offered to take the case pro bono, and within a day, more than 150 people had reached out for help. “People were calling me a savior,” Khan says. “It was overwhelming.” 

On May 17, they sent Zippy a legal notice—to his two shops in Karachi, his villa in the city’s Bahria Town neighborhood, and his other residence in Sukkur, 230 miles from the city. All the notices were sent back. “We discovered that he had fled,” Zaman says. “The shops he had opened were closed. And the residential addresses sent back the legal notices, too, saying he no longer lived there.”

After the legal notices were sent back, a group of people who’d bought from ZipTech in Karachi decided to approach the police to file a complaint—but they were dismissed. Zaman says the police told the lawyers that the case did not fall under their purview, and demanded receipts, which Zippy’s customers did not have—something that is typical in the informal economy.

This, the lawyers say, is a typical response. People “in places of authority don’t understand these transactions, they make no sense to them. They can’t investigate them because they don’t understand them and they don’t understand what they mean. They also don’t interest them, these sort of white-collar crimes,” Zaman says. “If something like the FTX [collapse] happened here in Pakistan, our investigation authorities would not even know where to start.”

But in the past few weeks, it’s seemed as though law enforcement has finally started to take interest. On January 30, Khan received an email from the Federal Investigation Agency asking him to submit a statement via email in the case against Muhammad Hassan, aka Major Zippy, aka Hassan Cheetah. Then, on February 10, the agency called him and asked him to round up a handful of people who had paid ZipTech but never received their items, and to get them to record statements in-person at the agency’s office in Karachi. It’s not clear what prompted the sudden interest.

If the case proceeds and it is discovered that Zippy fled the country—Khan and Zaman are certain that he did—his Pakistani passport would be canceled. If he were to return to Pakistan, he would be arrested on arrival.

Below Khan’s post in the Pakistani PC Gamers group calling for affected people to come forward and record their statements, a flurry of encouraging comments praise the lawyer for staying on the case, and the authorities for finally initiating an investigation. But there were also detractors—a number of whom expressed their disillusionment with Pakistan’s justice system. “The country is being run by international scammers,” wrote a group member. “This corrupt system gives me no hope.”

Whatever the resolution to the legal case, Major Zippy has wrecked the community he was once a part of. “There is a trust deficit now, between sellers and buyers,” Khan says. “If you’re not doing a face-to-face deal, no one trusts you. On the whole, this fiasco has cost the gaming community a lot. Irreparable damage.”