The U.S. Supreme Court on June 4 unanimously rejected a challenge to the U.S. Securities and Exchange Commission’s (SEC’s) broad authority to recover illegal profits through the disgorgement process.
Disgorgement is a process in which a person or company is made to give up profits gained from illegal or unethical acts.
The Supreme Court ruled that the SEC may recover ill-gotten gains even if the agency cannot show that investors experienced a financial loss.
Justice Neil Gorsuch wrote the court’s 9–0 opinion. No justices dissented. Justice Clarence Thomas filed a separate concurring opinion.
The justices ruled against the petitioner, Ongkaruck Sripetch, who received a 21-month prison term after pleading guilty in 2022 to selling unregistered securities involving penny-stock companies. He was also charged with several counts of securities fraud, but he did not plead guilty to them and was not convicted of those offenses. Those charges were dismissed as a result of a plea agreement.
Sripetch objected when the SEC sought an order requiring him to give up more than $4.1 million in ill-gotten gains. He argued that the SEC’s demand ran afoul of Liu v. SEC (2020), in which the Supreme Court held that while such disgorgement orders may be made as equitable relief under the Securities Act of 1933, they must be limited to the wrongdoer’s net profits and must be awarded for victims, according to the opinion.
Courts have equitable authority, meaning they can order fair remedies when standard legal remedies are deemed insufficient.
Sripetch argued that the disgorgement scheme was illegal because the SEC didn’t have evidence that his actions caused any investors to incur financial losses. Because there was no evidence of losses, he argued there were “no ‘victims’ for whom disgorgement could be awarded under Liu,” the opinion said.
The SEC disagreed, arguing that investors could be deemed “victims” under Liu even if they lost no money, but said that its evidence nonetheless showed investors had experienced financial losses “as a result of Sripetch’s wrongdoing,” the opinion said.
A federal district court agreed with the SEC that it had done enough to prove that investors had financial losses, but did not rule on whether such a demonstration was needed in the first place.
The U.S. Court of Appeals for the Ninth Circuit accepted the argument that a finding of financial harm was not needed before a court orders disgorgement, and that, under Liu, disgorgement has to be “awarded for victims.”
The Ninth Circuit did not accept Sripetch’s argument that a “victim” must be “narrowly defined as an individual or entity that has suffered [financial] harm.” That court cited prior rulings indicating that when disgorgement was sought, the entity seeking it need only show “an actionable interference by the defendant with the claimant’s legally protected interests,” the opinion said.
Writing for the Supreme Court, Gorsuch said that a showing of financial loss “is not required before an investor may qualify as a victim of an offender’s wrongdoing entitled to compensation.”
“After a showing that the defendant interfered with the plaintiff’s legally protected rights, courts sitting in equity have long issued remedies designed to ‘deprive wrongdoers of their net profits from unlawful activity,’” the justice said, quoting the Liu decision.
“Under traditional equitable principles, a victim seeking disgorgement of a defendant’s unlawful gains does not need to prove he has ‘suffered a corresponding loss or,’ indeed, ‘any loss.’”
Thomas agreed with the high court’s main holding, but suggested the justices should go further in the future.
“The Court assumes without deciding that disgorgement is an equitable remedy, even after Congress amended the [SEC’s governing] statute to separate disgorgement from equitable remedies,” he said in his concurring opinion.
“In a future case, we should recognize that disgorgement is now a legal remedy for which the Seventh Amendment requires a jury trial.”
In a separate ruling on June 4, the Supreme Court left intact the Federal Communications Commission’s authority to impose large fines through its in-house adjudication system.
The dispute was the latest legal case to test whether the in-house enforcement system used by a federal agency violates the Seventh Amendment.
The case followed the Supreme Court’s two-year-old decision in SEC v. Jarkesy, which limited the SEC’s use of in-house administrative tribunals, holding that defendants facing civil penalties are entitled to a jury trial under the Seventh Amendment.
This article by Matthew Vadum appeared June 5, 2026, in The Epoch Times.