Fifth Circuit Reopens the Door to SEC's Fraud Case Against Texas Attorney General Ken Paxton
Fifth Circuit Reopens the Door to SEC's Fraud Case Against Texas Attorney General Ken Paxton A federal appeals court has revived the Securities and Exchange Commission's civil fraud suit against Texas
Fifth Circuit Reopens the Door to SEC's Fraud Case Against Texas Attorney General Ken Paxton
A federal appeals court has revived the Securities and Exchange Commission's civil fraud suit against Texas Attorney General Ken Paxton, ruling that the agency filed its case within the statute of limitations — a decision that pulls one of the country's most prominent state law enforcement officials back into active federal litigation.
The U.S. Court of Appeals for the Fifth Circuit issued its opinion reversing a district court's dismissal of the SEC's 2023 complaint, which alleges Paxton misled investors in Servergy Inc., a technology company. The SEC claims Paxton, who was not an employee of the firm, recruited investors while receiving undisclosed compensation in the form of stock. A federal judge in the Eastern District of Texas had thrown out the case in 2024, finding the SEC waited too long to bring its claims under the applicable limitations period. The Fifth Circuit disagreed, holding that the clock ran from when the alleged fraud was or should have been discovered, not simply from the date of the underlying conduct.
The ruling is the latest turn in a case that has shadowed Paxton for years, separate from his 2023 impeachment acquittal in the Texas Senate. The SEC is seeking disgorgement, civil penalties and an injunction barring future securities-law violations. Paxton has consistently denied wrongdoing and characterized the suit as politically motivated; the merits of the fraud allegations have not been resolved.
What to watch: whether Paxton seeks en banc review before the full Fifth Circuit or petitions the Supreme Court, and whether the case proceeds to discovery — which could surface documents and testimony well before any trial date. The opinion also matters beyond Paxton, reinforcing how courts in one of the nation's most influential circuits calculate deadlines in SEC enforcement actions.
Primary sources: U.S. Court of Appeals for the Fifth Circuit; SEC litigation releases
FedKite Wire
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