The SEC refiled federal fraud charges against Texas Attorney General Ken Paxton, after the agency’s initial civil complaint was dismissed by a judge for lack of sufficient evidentiary allegations.
The amended complaint alleges Paxton knowingly defrauded an investment group he was involved with by violating an agreement that no member would pitch investment in a company if they were receiving any benefit that was not being provided to the other members of the investment group. Specifically, the SEC alleges that Paxton recommended the group invest in startup Servergy Inc. while that company was paying him a commission, a fact that was not disclosed to the group.
The amended complaint additionally alleged that Paxton did not properly disclose his commission on his taxes. Paxton’s attorneys released a statement that they were “disappointed” in the SEC’s decision to refile the case. The judge ordered the initial dismissal because the allegations did not establish any affirmative duty on Paxton’s part to inform potential investors that he stood to profit from any investment.
The case is number 4:16-cv-00246 in the United States District Court for the Eastern District of Texas.
Jeff Petersen is an attorney licensed in California and Illinois representing clients in a wide variety of SEC investigations and SEC enforcement actions. He can be reached in California at 858.792.3666 and in Illinois at 312.450.4584.