Servergy is the company Ken Paxton was paid to shill for without being up front about the fact that he was being paid to shill for them. That’s the context of this.
The company tied to Attorney General Ken Paxton’s indictments lied to dozens of investors from Alabama about a “miracle” product it couldn’t sell, stockholders allege in a lawsuit that seeks to recoup nearly $3 million from the firm.
Now, dozens of Alabamans are suing, saying they invested $2.8 million in Servergy in 2013 after receiving “bogus” information about the firm’s success from Mapp and other leaders. Their stock is now worthless, they said, and they want their money back.
Their lawsuit was filed in February but hasn’t been previously reported. It was included as a “related pending case” in the federal lawsuit against Paxton. The attorney general is not mentioned by name and is not a target of the lawsuit, which was filed in Dallas County District Court, but the Alabama investors cite his indictment in their complaint.
In their suit, the Alabama investors said they were unaware the U.S. Securities and Exchange Commission was investigating Servergy until the federal government sued the company to force it to comply with a subpoena for documents. Servergy never informed them of the probe, they say.
They allege that over the course of nearly a year in 2013, Servergy’s top officers held at least three “roadshow” presentations in their small city of Fairhope, hoping to entice new capital to help them fund a “miracle” server that was smaller yet more powerful than similar servers. Company representatives said they had pre-sold the server to Amazon, Netflix, NASA and the city of Beijing in China, and that Facebook, Walmart and CVS were also waiting on their product.
These claims “had no basis in fact,” the Alabama investors allege.
“Servergy’s claim that IBM and others were already waiting to buy out the Company, and that one such offer to purchase the Company already was in hand which would result in a quick 10-45% return for investors, was a lie,” the lawsuit says. “Even the chart that Servergy provided investors to tout the Company’s CTS-1000 server as compared to the competition was false.”
See here, here, and here for some background. This isn’t directly about Paxton, though without Servergy Paxton wouldn’t be in the trouble he’s in. And the allegations of utter dishonesty regarding the non-existent products Servergy – and by extension Paxton – was trying to get people to invest their money in goes to character. I mean, whatever the legalities of all this ultimately amount to, Paxton either had to know he was lying, or he didn’t do anywhere near the kind of due diligence he should have done before selling Servergy stock to his friends. His high-priced attorneys can’t make that fact go away.