Federal judge tosses SEC suit against Texas attorney general

AUSTIN, Texas (AP) — A federal judge on Thursday dismissed the U.S. government’s securities fraud lawsuit against Republican Texas Attorney General Ken Paxton, who still faces criminal charges of duping wealthy investors.

But the ruling by U.S. District Judge Amos Mazzant is a significant victory for Paxton, who has pleaded not guilty and is scheduled to stand trial in May on felony securities fraud charges. He faces five to 99 years in prison if convicted.

The lawsuit filed by the U.S. Securities and Exchange Commission was nearly identical to the case brought by criminal prosecutors. Both allege that Paxton of misled investors in a high-tech Texas startup by not disclosing he was being paid by the company.

Mazzant said in his Thursday ruling that Paxton had “no plausible legal duty” to disclose his arrangement. Last year, Mazzant had tentatively dismissed the case against Paxton but gave federal regulators another chance to strengthen their case. But he was again unimpressed.

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“Paxton’s conduct simply does not give rise to liability under the federal securities laws as they exist today,” Mazzant said.

Paxton has been unsuccessful in convincing criminal courts to also dismiss his case. He is now scheduled for trial nearly two years after being indicted.

Paxton’s criminal trial is scheduled to take place in Collin County, a conservative Dallas suburb where Paxton lives and where a grand jury indicted him in 2015. But prosecutors told state District Judge George Gallagher that a “two-year long crusade” of lawsuits, social media posts, leaks and a public relations blitz surrounding the case has made it impossible to get a fair and impartial trial and have asked to move the venue.

Gallagher has not yet ruled on that request.