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Federal Judge Dismisses Securities Fraud Civil Lawsuit Against Ken Paxton

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A federal judge has thrown out a lawsuit the U.S. Securities and Exchange Commission filed against Texas Attorney General Ken Paxton, accusing him of engaging in securities fraud.

In April, the SEC claimed that Paxton, while doing private investment work in 2014 before he became attorney general, pressured and solicited investors to invest in a tech company called Severgy — without disclosing that Severgy was compensating him for the work. Those investors were fellow lawmakers and some of Paxton's friends.

But late Friday,  U.S. District Judge Amos Mazzant III said in a ruling that federal securities laws don't recognize the SEC's allegations, concluding that Paxton did not have an obligation to disclose his "financial arrangement" with investors. 

“This case is not about whether Paxton had a moral obligation to disclose his financial arrangement with Severgy to potential investors," Mazzant wrote. "This case is also not about whether Paxton had some general obligation to disclose his financial arrangement to his investor group. The only issue before the court is to determine whether the facts as pleaded give rise to a plausible claim under federal securities laws."

And in Mazzant's opinion, apparently the answer is no.

Still, Paxton is not off the hook for the criminal charges in state court he faces for the same allegations. 

Last year, Paxton was arrested in Collin County, near Dallas, on felony charges of securities fraud and acting as an investment adviser representative without being registered with the state.

Apparently, from the looks of his mugshot, it was something to smile about.

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