Texas Attorney General Ken Paxton faces four new federal charges in an SEC civil court case announced today.
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“People recruiting investors have a legal obligation to disclose any compensation they are receiving to promote a stock”, Shamoil T. Shipchandler, director of the SEC’s Fort Worth regional office, said in a news release.
“Paxton raised $840,000 in investor funds for Servergy and received 100,000 shares of stock in return, but never disclosed his commissions to prospective investors while recruiting them”.
SEC investigators say Paxton meant to invest $100,000 of his own money into Servergy but that company founder Bill Mapp refused.
According to the SEC, Paxton persuaded five investors to put $840,000 into Servergy – and did so without attempting to confirm Mapp’s claims about the sales of its data servers and their technological capabilities.
Paxton’s relationship with Servergy Inc.is part of an SEC investigation that also resulted Monday in securities fraud charges against the firm’s founder, William Mapp.
The state’s constitution doesn’t say the Attorney General has to be a lawyer but Wood thinks it would be interpreted that way.
The SEC doesn’t state what false technical claims were in the literature Paxton forwarded, but elsewhere the agency argues that Servergy’s comparisons to other products were misleading.
Paxton sold “friends, business associates, law firm clients” as well as members of his investment group, the charges alleged.
On July 28, 2015, Paxton was indicted on two felony counts of securities fraud and one felony charge of failing to register as an investment adviser representative.
Separately, Servergy and Caleb J. White, 36, who served on the company’s board and raised money for Servergy on commission without disclosing it, agreed to settle the cases against them.
Mr. Mateja said that while he wasn’t surprised the Securities and Exchange Commission filed a parallel civil claim to the criminal case being litigated in Collin County, it questioned the timing, “nearly a year after the Collin County Special Prosecutors filed their criminal case”. The SEC said the litigation against Paxton is ongoing and that his specific violation was of Section 17(b) of the Securities Act and Section 15(a) of the Exchange Act.
After their meeting, Mapp emailed Paxton and reiterated his offer to pay Paxton either in common stock or a combination of cash and stock.
“Despite a duty to do so, Paxton knowingly or recklessly failed to inform the individuals he recruited that he was being compensated to promote Servergy to investors”, the filing states. “God doesn’t want me to take your money”.
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From November 2009 to September 2013 (“Relevant Period”), McKinney, Texas- based technology company Servergy, Inc.
