Supreme Court backs SEC disgorgement power in fraud cases
The court said the SEC can claw back illegal profits without proving investor loss, preserving a key fraud remedy in penny-stock and other securities cases.
Disgorgement is the SEC’s way of making fraudsters give back the profits they should never have kept. The Supreme Court kept that power intact on June 4, 2026, ruling 9-0 that the agency does not have to prove investors suffered pecuniary loss before it can force repayment of unlawful gains.
The case, Sripetch v. Securities and Exchange Commission, No. 25-466, centered on Ongkaruck Sripetch and a string of fraudulent schemes involving at least 20 penny-stock companies. A California court had already ordered him to repay more than $3 million in ill-gotten gains and interest, and the SEC later sought more than $4.1 million in disgorgement after Sripetch consented to judgment and then objected to the remedy. His core defense was simple: the SEC should have to show that victims lost money before it can take away the profits.
The justices rejected that argument. Justice Neil Gorsuch wrote the majority opinion, and Justice Clarence Thomas wrote a concurring opinion. The court said traditional equity principles allow restitution of wrongful gains even when the plaintiff cannot prove a matching loss, or any loss at all. That reasoning preserves a long-running feature of U.S. securities law that has been used since the 1970s, later reinforced by Congress in the Sarbanes-Oxley Act of 2002 and again after Liu v. SEC, when lawmakers added 15 U.S.C. § 78u(d)(7) to expressly authorize disgorgement.
The ruling matters because disgorgement is one of the SEC’s sharpest enforcement tools. It lets regulators strip away profits from insider trading, accounting fraud and penny-stock scams even when victim losses are difficult to pin down with precision. In Sripetch’s case, the Ninth Circuit had already rejected his challenge, deepening a split among the federal appeals courts; the Supreme Court’s unanimous decision now closes that door for the time being.
The court stopped short of deciding exactly how 15 U.S.C. § 78u(d)(7) expands the SEC’s powers, but the practical effect is clear: defendants cannot escape disgorgement simply by arguing that investor losses are too hard to quantify. At oral argument, several justices appeared skeptical of treating the remedy as a penalty when it targets only illicit profits, and the result gives the SEC a clean legal victory as it continues to press fraud cases where the money trail is tangled but the wrongdoing is not.
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