Officials said hundreds of thousands of blank degree forms, student cards and authentication documents were found.
Axact has called the claims “baseless”.
The Federal Investigation Agency (FIA) chief for Sindh province, Shahid Hayat, told media the agency had enough evidence to proceed against Sheikh on charges of fraud, forgery, money laundering and violation of electronic transactions law.
The wider interest generated by the newspaper report in Pakistan is attributed to the fact the company was going to launch a well-promoted, high-profile print and electronic media group called Bol (Speak Up), offering three to four times the market salaries to journalists it had hired.
A number of senior journalists who had been with Bol for several years, preparing for the launch, have now resigned from their positions.
Axact has strenuously denied the allegations against it.
On its website, it said last week: “Axact provides a comprehensive education management system that benefits diverse bodies of students and caters to all types of educational institutions –– online and traditional.
“All ten business units of Axact are completely legitimate, legal and committed to enhancing the quality of IT services across the world.”
It has accused rival media groups to Bol of “campaigning” against it.
Sheikh and Atiq are expected to be produced in court today, depending on how soon formal charges are drawn up.