Supreme Court Upholds SEC Power to Collect Fraud Profits

The Supreme Court of the United States ruled unanimously on June 4, 2026, that the Securities and Exchange Commission (SEC) can obtain disgorgement awards without proving that specific victims suffered pecuniary loss. In Sripetch v. SEC, the Court held that the purpose of disgorgement is to strip wrongdoers of unjust profits rather than to compensate victims for damages, resolving a circuit split between the First, Second, and Ninth Circuits.

The case involved Ongkaruck Sripetch, a Los Angeles resident who operated pump-and-dump schemes involving penny stock companies. Sripetch challenged an order to pay over $3 million, arguing that without proof of investor loss, there were no victims to receive the funds. Justice Neil Gorsuch, writing for the Court, rejected this argument, stating that equitable disgorgement is measured by the defendant's unjust gain.

While the ruling confirms the SEC's broad enforcement authority, it maintains that disgorgement cannot be used as a penalty and must be tied to net profits. Justice Clarence Thomas filed a concurring opinion suggesting that disgorgement should be recognized as a legal remedy, which would require a jury trial under the Seventh Amendment, although the majority declined to address that specific issue.

The SEC has utilized this remedy extensively, collecting approximately $6.1 billion in the prior year under the Biden administration and $1.4 billion in fiscal 2025, excluding a single $8 billion Ponzi scheme payment.