US Supreme Court backs SEC in fight over 'disgorgement' power
WASHINGTON - The U.S. Supreme Court on Thursday rejected a challenge to the Securities and Exchange Commission's broad authority to recover illegal profits using a financial remedy called disgorgement, buttressing one of the Wall Street watchdog agency's key powers.
The justices, in a 9-0 ruling, upheld a lower court's decision that had endorsed a wide use of the SEC's disgorgement authority. President Donald Trump's administration had defended the SEC in the case.
The challenge to the SEC's disgorgement power was brought by a defendant named Ongkaruck Sripetch. At the agency's request, a court in California ordered Sripetch to repay more than $3 million in ill-gotten gains and interest related to a financial fraud case.
The SEC's general power to pursue disgorgement was not in dispute in the case. Courts have long recognized this authority and Congress enshrined it in federal law. At issue was whether the agency must show that victims suffered economic harm before it can seek the surrender of illegal profits.
Justice Department lawyers during arguments before the justices in April said the SEC was not required to show that fraud inflicted financial, or "pecuniary," harm before pursuing repayment through the courts.
Conservative Justice Neil Gorsuch, writing for the unanimous court, concluded that "a showing of pecuniary loss is not required before an investor may qualify as a victim of an offender's wrongdoing entitled to compensation."
Under Trump, the SEC used the remedy to obtain around $1.4 billion in fiscal 2025, according to an agency tally that excluded certain sums. The prior year under Democratic President Joe Biden, the SEC obtained $6.1 billion through disgorgement, almost three-fourths of its total financial penalties.
The SEC in 2020 sought disgorgement for illicit proceeds that it said Sripetch reaped through fraudulent means, including a so-called pump-and-dump scheme that involved artificially inflating the price of penny stocks before selling off his shares at a profit.
Sripetch admitted violating securities law, and in a related criminal case was sentenced to 21 months in prison. Sripetch challenged the lower court's disgorgement order on the grounds that the SEC failed to prove his actions caused stock prices to drop or otherwise financially harmed investors.
A California-based federal judge sided with the SEC's broader interpretation of its disgorgement power in a ruling that was upheld last year by the San Francisco-based 9th U.S. Circuit Court of Appeals.
The SEC's $1.4 billion disgorgement figure for fiscal 2025 excludes certain repayments secured by other federal agencies and an $8 billion payment made in January 2025, during the second week of Trump's return to the White House, stemming from long-running SEC litigation concerning a Ponzi scheme. Beyond disgorgement, the SEC can also pursue fines, sanctions and other punishment.
The Supreme Court in a 2024 ruling also involving the SEC rejected the agency's in-house enforcement of laws protecting investors against securities fraud. The court ruled that agency proceedings seeking penalties for fraud that are handled by the SEC itself instead of in federal court violate the U.S. Constitution's Seventh Amendment right to a jury trial.
(Reporting by John Kruzel; additional reporting by Andrew Chung; Editing by Will Dunham)
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