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In a unanimous decision on June 4, the U.S. Supreme Court held that the U.S. Securities and Exchange Commission (SEC) may obtain disgorgement of a defendant’s ill-gotten gains without proving that investors suffered a corresponding pecuniary loss. The decision in Sripetch v. SEC resolves what had been a growing divide among the federal circuit courts of appeals on the issue while preserving the SEC’s ability to recover ill-gotten gains obtained through securities law violations. For public companies, investment advisers, broker-dealers and other market participants, the ruling conforms across all circuits the SEC’s burden when seeking disgorgement. 

Ninth Circuit’s Decision in Sripetch Widens Circuit Split

As Justice Neil Gorsuch’s opinion highlights, beginning in the 1970s, the SEC persuaded courts to order defendants who violated the federal securities laws to disgorge ill-gotten gains “as an exercise of th[e] [courts’] ‘inherent equity power’ to grant relief ancillary to an injunction.'[1] However, over time, the SEC sought and obtained disgorgement awards that did not compensate victims. Instead, the disgorged funds were sent to the U.S. Treasury and in amounts that often exceeded the ill-gotten gains to defendants as a result of the violations.[2] Most recently, in the 2020 case Liu v. SEC, the Supreme Court imposed key limitations on the SEC’s use of the disgorgement remedy, ruling that a disgorgement award must not exceed the defendants’ net profits derived from their unlawful conduct and must be awarded for victims, not to the U.S. Treasury.[3] In paring back the scope of the disgorgement authority, the court set out that the remedy was permissible under 15 U.S.C. Section 78u(d)(5) — which allows the SEC to obtain “any equitable relief that may be appropriate or necessary for the benefit of investors” — as long as the remedy adhered to “traditional equitable principles.”[4] After the Liu decision, Congress added Section 78u(d)(7), which expressly permits the SEC to seek disgorgement in enforcement proceedings. 

In Sripetch, the SEC alleged that petitioner Ongkaruck Sripetch engaged in fraudulent schemes related to 20 or more penny-stock companies, including “pump-and-dump” operations by which Sripetch purchased shares in those companies and artificially inflated the shares’ market price before selling them at a profit. The SEC charged Sripetch with six counts of securities fraud and one count of selling unregistered securities for which Sripetch consented to the entry of judgment against him. He also initially agreed to the court’s order of disgorgement. However, when the SEC ordered over $4.1 million in disgorgement, Sripetch protested, arguing that the SEC lacked evidence that his schemes caused investors financial harm as required by the holding in Liu. On appeal, the U.S. Court of Appeals for the Ninth Circuit in 2025 held that a showing of pecuniary harm is not required for a court to order disgorgement, joining the First Circuit. The Second Circuit had already adopted the opposite view in 2023. The Supreme Court granted certiorari to settle this conflict.

Supreme Court Affirms SEC’s Disgorgement Award

The Supreme Court affirmed the Ninth Circuit’s holding, reasoning that “traditional equitable principles do not require a showing of pecuniary loss to justify a disgorgement award and nothing in Liu teaches otherwise.”[5] The court disagreed with Sripetch’s characterization of Liu, finding that the requirement that disgorgement be “awarded for victims” does not necessarily impose a burden on the SEC to show pecuniary losses suffered by investors.

Further, the court grounded its decision in the distinction between damages and the equitable remedy of disgorgement. The court reasoned that, while damages are measured by a plaintiff’s loss, the point of the equitable remedy of disgorgement is “‘to give to the plaintiff the amount by which [the defendant] has been enriched’ from the wrongful invasion of the plaintiff’s legally protected interests.”[6] Accordingly, under traditional equitable principles, a victim who “has suffered an interference with protected interests … may be entitled to restitution of [the defendant’s] wrongful gain … even when he has suffered no measurable loss whatsoever.”[7]