The Securities and Exchange Commission charged the Texas attorney general with civil securities fraud in relation to alleged false advertising by a Texas energy company.
Ken Paxton was indicted by a Texas grand jury for his role with the company last summer.
As a member of the Texas House of Representatives, Paxton promoted the company, Servergy, to investors, but never disclosed that he was receiving commissions for doing so, according to the SEC. He raised $840,000 in investments for the company.
“People recruiting investors have a legal obligation to disclose any compensation they are receiving to promote a stock, and we allege that Paxton [and another person] concealed the compensation they were receiving for touting Servergy’s product,” said Shamoil Shipchandler, director of the SEC’s Fort Worth regional office.
The SEC complaint says Servergy told investors that its sole product, a computer server, was particular energy-efficient and could replace servers currently in use in top data centers. In reality, the server was not capable of competing with top-of-the-line servers.
Paxton, a Republican, became attorney general in January 2015 and has challenged the Obama administration over immigration and environmental policies.
