Qazi Sanaullah Panipati (Allah have mercy on him) said,
‘If an individual stayed in the company of a Shaikh with best intentions (husn e eitiqaad) for a duration but did not find it effective (in bringing him closer to Allah) then it is essential (wajib) for him to leave this Shaikh and seek another one. Otherwise it will be (like) his object of worship and goal is Shaikh and not Allah. This is shirk (associating partners with Allah). ‘
Talifaat e Musleh al Umma, volume 2, page 381
Recently a sincere individual inquired regarding his Shaikh who has broken his pledge with his own Shaikh due to some serious issues, like inappropriate interactions with opposite sex and financial fraud. He wanted to know on how to proceed with this new development.
It should be explicitly clear upfront that Tasawwuf is totally subservient to Shariah. Any negligence in observance of Shariah ruling can not be tolerated in Tasawwuf.
In this scenario people fall into two categories,
The most appropriate thing for mureedeen is to seek a new Shaikh. However, they must not hurry and should be more careful in making sure that they have the true Shaikh this time. Also, they must do it with extreme adab. They must continue their daily routine recitations and dhikr etc. as previously. They must not start a movement against the Shaikh at all. Sayyidi wa sanadi Mufti Mohammed Taqi Usmani (Allah preserve and protect him) emphasized on this last point. They should make dua for Islah of the Shaikh they left.
The mujazeen (who have permission to initiate others) have to declare openly that they are no more mujaaz. They have broken their baiyet (pledge). They must try for islah (reformation) of the Shaikh. However, their mureedeen and mujazeen must be told that they are now free to seek someone appropriate. They have to recognize that this step is a bigger test for them (in testing their sincerity) than the first one (faltering of their Shaikh). They should then seek another Shaikh and do as stated above for the mureedeen. They must remember that Allah does not waste those who are sincere in seeking His pleasure.
May Allah protect us all from calamities of this path.