Federal Judge Tosses Out Securities Fraud Lawsuit Filed Against Texas Attorney General

AUSTIN, TX -- A federal judge on Friday threw out a lawsuit by securities regulators that accused Attorney General Ken Paxton of fraud in his private business dealings from 2011, according to media reports.

The U.S. Securities and Exchange Commission had accused Paxton of soliciting investors for McKinney-based tech company Servergy Inc. without disclosing to would-be clients that he was being paid to promote the firm's stock.

U.S. District Judge Amos Mazzant III ruled that Paxton did not have a legal obligation to disclose his financial arrangement to potential clients, the Austin American-Statesman reported.

The ruling represents a s substantive victory for Paxton, who previously endured the indignity of having to endure having a booking photo taken of him connected to the allegations while serving as the state's highest-ranking law enforcement official. Paxton has been dogged with the case for half of his 19 months as attorney general, the Statesman noted.

It's also a reversal from June, when his defense team argued unsuccessfully before an appeals court to reconsider a prior decision to uphold criminal charges against AG Paxton.

In making his ruling, Mazzant said the SEC's allegations weren't recognized under federal securities laws, the Statesman reported. The jurist then gave the regulatory agency two weeks to amend its lawsuit if it can find additional facts supporting their claims, according to the report.

Paxton's legal troubles began when a Collin County grand jury indicted him on securities fraud charges and failure to register with the state securities board. After that indictment, the SEC followed suit with its own litigation in April.

But the federal court victory doesn't mean Paxton is out of the legal woods yet. There are still state criminal charges predicated on similar fraud charges related to his work for Servergy, the Statesman reported.

SEC investigators accuse Paxton of persuading five investors to pony up $840,000 into Servergy, without confirming the claims of the company's founder, William Mapp, related to the sale of its data servers and their technological capabilities, the Texas Tribune previously reported. One month later, Paxton received 100,000 shares of stock in the company.

>>> Read the full story at Austin American-Statesman

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