BREAKING: Texas GOP Attorney General Ken Paxton Charged With Securities Fraud

Paxton Is Accused of Raising $840,000 for a Tech Company and Receiving 100,000 Shares of Stock in Exchange Without Disclosing the Commission

Texas Republican Attorney General Ken Paxton on Monday was charged with securities fraud in federal court. The U.S. Securities and Exchange Commission alleges in court documents that Paxton and one other man were paid commissions by Servergy, a technology company, “to promote the company to potential investors. Neither White nor Paxton disclosed their arrangements to prospective investors.” Servergy and its founder are also being charged. 

The Texas Tribune reports today’s charges “are similar to the allegations Paxton faces in a pending indictment handed up by a Collin County grand jury last year.”

The SEC alleges that while “serving in the Texas House of Representatives, Paxton allegedly reached an agreement,” a press release states, “to promote Servergy to prospective investors in return for shares of Servergy stock.” 

“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.”

“People recruiting investors have a legal obligation to disclose any compensation they are receiving to promote a stock, and we allege that Paxton and White concealed the compensation they were receiving for touting Servergy’s product,” Shamoil T. Shipchandler, Director of the SEC’s Fort Worth Regional Office, said in the statement.

In August of 2015, Paxton was arrested and booked on two first-degree securities fraud charges, and one charge of third-degree failure to register with the State Securities Board. First-degree felony charges carry a sentence of 5 to 99 years if convicted.

Paxton has taken an activist stance against LGBT people and their civil rights, and seems intent on using his religion in addition to his office, as tools to do so.

UPDATE I: 2:36 PM EDT –
From today’s court filing:

From November 2009 to September 2013 Servergy “raised approximately $26 million in private securities offerings to develop what it claimed was a revolutionary new server, the Cleantech-1000.”

“In oral and written communications with prospective investors, and in Servergy’s February 2013 Private Placement Memorandum (“PPM”), Servergy’s co-founder and then-CEO and Chairman William E. Mapp, III (“Mapp”) led investors to believe that the CTS-1000 was in high demand by falsely claiming notable companies like Amazon.com and Freescale Semiconductors had pre-ordered the product.”

“In addition, Mapp claimed the CTS-1000 consumed up to 80% less power than other servers and that it was positioned to compete with servers from industry leaders like Hewlett Packard, IBM, and Dell for use in large data centers. Mapp had no reasonable basis for these claims and failed to disclose that, in reality, the CTS-1000 was based on outdated technology that was being phased out of the industry.”

“As part of its fundraising efforts, Servergy paid Caleb J. White (“White”) and Warren K. Paxton, Jr. (“Paxton”) commissions to promote the company to potential investors. Neither White nor Paxton disclosed their arrangements to prospective investors.”

 

EARLIER:

Texas AG Ken Paxton Headlines Anti-Gay Marriage And Religious Freedom Event

Ken Paxton May Face Contempt Charges For Refusing To Include Man’s Husband On Death Certificate

Ken Paxton: Repealing Nondiscrimination Law ‘Victory For Houston Pastors’ And ‘Religious Liberty’

 

This is a breaking news and developing story. Details may change. This story will be updated, and NCRM will likely publish follow-up stories on this news. Stay tuned and refresh for updates.

 

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