Client Alert: Jurisdictional Win Shields Businesses From Texas State Securities Board Overreach
Date: July 22, 2025
The dismissal of the case reinforces the limits of state regulatory authority over nonresident entities and individuals absent purposeful contacts with Texas. This decision aligns with the Supreme Court of Texas’ June 20, 2025, ruling in BRP Rotax GmbH & Co. KG v. Shaik (2025 WL 1727903), which reiterated the boundaries of personal jurisdiction over foreign defendants and reinforced protections for innovative enterprises operating in emerging markets, such as digital assets.
Key Takeaways
- Jurisdictional Limits Upheld: The SOAH dismissed the TSSB’s Order due to a lack of personal jurisdiction, finding no evidence that the respondents had sufficient contacts with Texas to justify regulatory action.
- Alignment with Rotax: The Billionico decision echoes the Texas Supreme Court’s recent ruling in Rotax, emphasizing that nonresident defendants must have purposeful contacts with Texas for jurisdiction to attach.
- Global Business Impact: The ruling safeguards international companies from state regulatory actions lacking jurisdictional grounds, particularly in digital markets that were the subject of the TSSB’s order in Billionico.
In April 2025, the Texas State Securities Board (TSSB) issued Emergency Cease and Desist Order No. ENF-24-CDO-1882 against Billionico Academy, Auratus, and related entities and individuals, alleging they offered unregistered securities through a digital gold vault and associated educational programs in the cryptocurrency and blockchain space. Billionico Academy, a global education platform, empowers individuals worldwide with innovative training in digital markets, while Auratus, a commodity services provider, offers a digital gold vault to facilitate secure, transparent commodity transactions. Operating from Switzerland, with individual respondents residing in Switzerland, Germany, Mexico, and Singapore, the respondents challenged the Order, asserting that neither the TSSB nor SOAH had personal jurisdiction over them due to their lack of contacts with Texas.
The TSSB’s Order primarily relied on a March 2024 communication attempt by its Enforcement Director, Joseph Rotunda, with respondent Christian Cruz Riander, who declined to engage. The TSSB further alleged that Billionico’s website and a global Zoom call on April 19, 2024, constituted offers of securities in Texas. In response, the respondents filed a Special Appearance on June 6, 2025, supported by sworn declarations affirming their operations are conducted outside Texas and that robust compliance measures, such as Auratus’s Know Your Customer (KYC) process, prevent U.S. residents, including Texans, from purchasing their products. These declarations underscored the respondents’ commitment to lawful global business practices and their lack of targeted activity in Texas.
The Jurisdictional Dismissal
SOAH Administrative Law Judge Sarah Starnes granted the respondents’ Special Appearance, dismissing the case for lack of personal jurisdiction. The ALJ found that the TSSB failed to allege sufficient facts to establish either general or specific jurisdiction over the respondents, all of whom are nonresidents. Key findings include:
- No General Jurisdiction: The TSSB’s Order did not allege continuous or systematic contacts with Texas, such as residency, property ownership, or regular business activities, that would support general jurisdiction.
- No Specific Jurisdiction: The TSSB similarly failed to show that the respondents purposefully availed themselves of Texas’s jurisdiction. The Order’s sole Texas connection—a March 2024 communication attempt by the Enforcement Director—was deemed insufficient. The ALJ noted that the respondents’ global Zoom call and website did not specifically target Texas, and Auratus’s KYC process actively prevented Texas residents from purchasing its products.
- Uncontroverted Evidence: The TSSB did not respond to the Special Appearance and failed to provide evidence refuting the respondents’ declarations. Under SOAH Rules, the lack of counter-evidence supported dismissal.
The ALJ declined to rule on the respondents’ Motion for Summary Disposition, which respondents supported with evidence that the TSSB failed to controvert, finding it moot due to the jurisdictional dismissal.
The Rotax Precedent and Its Influence
The Billionico decision aligns with the Supreme Court of Texas’ ruling in BRP Rotax GmbH & Co. KG v. Shaik (2025 WL 1727903), which reiterated the standards for personal jurisdiction over nonresident defendants. In Rotax, plaintiffs filed a products liability and negligence-based claims against the designer and manufacturer of an aircraft that crashed, the seller of the aircraft, and Rotax, the designer and manufacturer of the engine that lost power. In finding that the Texas district court lacked personal jurisdiction over Rotax, the Court held that jurisdiction requires “minimum contacts” with Texas, ensuring that exercising jurisdiction does not violate “traditional notions of fair play and substantial justice” (Luciano v. SprayFoamPolymers.com, LLC, 625 S.W.3d 1, 8-9 (Tex. 2021), cited in Rotax). The Court emphasized:
- Purposeful Availment: Specific jurisdiction requires intentional, Texas-directed activities, not mere awareness that a product might reach Texas via the stream of commerce. Rotax’s distribution agreement covering the U.S. was insufficient without evidence of Texas-specific targeting.
- Individualized Contacts: Jurisdiction must be assessed for each defendant, not based on the actions of co-defendants or related entities. The Texas crash location alone did not establish jurisdiction absent Rotax’s direct engagement.
- Due Process Protections: Nonresidents must have fair warning that their conduct could subject them to Texas jurisdiction to align with “traditional notions of fair play and substantial justice.”
In Billionico, the ALJ applied these principles, finding that the Order did not allege nor did the evidence establish that the respondents directed activities toward Texas or had any meaningful contacts with the state. The TSSB’s vague allegations of a website and Zoom call, without specific Texas targeting, mirrored the insufficient jurisdictional claims rejected in Rotax. Declarations from the Billionico respondents rejecting any Texas ties further negated any inference of purposeful availment, reinforcing the Rotax standard that jurisdiction cannot be based on speculative or conclusory allegations.
Implications for Global Businesses
The Billionico dismissal offers critical protections for international companies operating in emerging industries, such as digital assets, and how to best navigate state regulatory landscapes. It highlights:
- Limits of State Regulatory Power: State agencies like the TSSB cannot assert jurisdiction over nonresidents without clear evidence of purposeful contacts with Texas. This protects global businesses from overreaching enforcement actions.
- Strategic Jurisdictional Challenges: Timely Special Appearances, backed by robust evidence like sworn declarations, can halt regulatory actions early, avoiding costly hearings.
- Safeguards Matter: Implementing measures like KYC processes to exclude certain jurisdictions (e.g., Texas or the U.S.) can bolster arguments against jurisdiction, as demonstrated by Auratus’s successful exclusion of U.S. residents in the Billionico case.
- Alignment with Federal Principles: The Billionico and Rotax decisions align with federal due process standards, ensuring that nonresidents are not unfairly subjected to state authority without sufficient ties. For businesses operating online or across borders, the Billionico case underscores the importance of proactive compliance and legal strategies to navigate jurisdictional complexities in cross-border operations.
How Whiteford Can Help
Whiteford has extensive experience navigating complex securities and regulatory matters, including administrative proceedings and proactive investigations. We advise clients on:
- Defending against state and federal securities enforcement actions.
- Structuring business operations to minimize jurisdictional exposure.
- Crafting compliance strategies for digital and cross-border transactions.
If your business faces regulatory scrutiny or operates in multiple jurisdictions, please feel free to contact us to discuss how we can assist you with these issues.
The information contained here is not intended to provide legal advice or opinion and should not be acted upon without consulting an attorney. Counsel should not be selected based on advertising materials, and we recommend that you conduct further investigation when seeking legal representation.