Sripetch v. SEC
The Supreme Court unanimously ruled that the SEC does not need to show investors lost money before a court can order a securities fraudster to return his illegal profits, resolving a split among the federal appeals courts.
The decision preserves a major SEC enforcement tool for fraud cases — such as pump-and-dump schemes — where investors' financial losses are hard to trace or prove, even if the fraudster pocketed millions.
How it got here: The district court ordered disgorgement, finding sufficient evidence of investor loss; the Ninth Circuit affirmed on a different ground — holding proof of loss is never required; the Supreme Court granted certiorari to resolve a circuit split.
The Case in Depth
What happened
Ongkaruck Sripetch orchestrated fraudulent schemes involving at least 20 penny-stock companies, including classic pump-and-dump operations in which he and co-conspirators inflated share prices and then sold their holdings. After the SEC sued him, Sripetch consented to judgment but fought the SEC's demand for over $4.1 million in disgorgement — the forced return of his illegal profits — arguing there could be no victims entitled to that money because the SEC had no evidence investors actually lost any cash.
The question before the Court
Must the SEC prove that investors suffered actual financial losses before a court can order someone to give back profits gained through securities fraud?
The Court's answer
No — the SEC does not need to prove that investors suffered actual financial losses to obtain a disgorgement award. Traditional equitable principles have long allowed courts to strip wrongdoers of profits earned by invading someone's legally protected interests, even when those victims' finances remained unchanged. The measure of disgorgement is the defendant's wrongful gain, not the plaintiff's loss — two remedies that have always operated on different principles.
The Court also declined to decide whether a newer law that Congress passed after its 2020 Liu ruling — which expressly authorizes "disgorgement" as a distinct SEC remedy — relaxes any of the equitable constraints Liu identified, such as requiring recovered funds to be returned to victims. Assuming those equitable rules still apply under the newer law, the result is the same: a requirement of proven financial loss has never been part of the equitable tradition governing disgorgement.
Curious how the Court got there? See the step-by-step legal reasoning →
Why it matters
The SEC can now pursue disgorgement — court-ordered return of illegal profits — without documenting specific dollar losses to individual investors. This matters most in schemes where share prices recover or losses are diffuse. Fraudsters who enriched themselves even without visibly harming victims' account balances can still be stripped of those gains in federal enforcement actions.
What changes now
The $4.1 million disgorgement award against Sripetch stands. More broadly, the SEC may continue pursuing disgorgement in securities fraud cases without proving specific investor financial losses. Justice Thomas's concurrence signals a major unresolved issue — whether the Seventh Amendment entitles defendants to a jury trial when the SEC seeks disgorgement — that the Court reserved for a future case and that lower courts are already divided on.
What this does not decide
The Court did not decide whether the post-Liu statute (§78u(d)(7)) frees the SEC from having to distribute recovered funds to victims rather than the Treasury. It also did not decide whether disgorgement is now a legal remedy triggering Seventh Amendment jury-trial rights — Justice Thomas's concurrence argues it is, but the majority left that question open.
Concurrences and dissents
How the Justices voted
Majority (1). Justice Gorsuch (author).
Separate writings (1). Justice Thomas (author of a concurrence).
Concurrence — Justice Thomas
“In a future case, we should recognize that disgorgement is now a legal remedy for which the Seventh Amendment requires a jury trial.”Justice Thomas flags the unresolved question of whether defendants have a constitutional right to a jury when the SEC seeks disgorgement.
Justice Thomas agreed with the majority's holding but wrote separately to argue that disgorgement under the post-Liu statute is now a legal remedy — not an equitable one — and that the Seventh Amendment therefore entitles defendants to a jury trial when the SEC seeks it. He detailed how Congress's decision to enumerate disgorgement separately, with its own limitations period distinct from equitable remedies, effectively reclassified the remedy as legal. He called on the Court to resolve this question in a future case, noting lower courts are already divided. Read the full concurrence →
How the Court got there
The legal reasoning, step by step
- The Court started from its 2020 ruling in Liu v. SEC (591 U.S. 71), which held that disgorgement under the SEC's 'equitable relief' statute must follow traditional equitable principles — including the rule that awards must be directed to victims. The question here was whether those principles also require the victims to have suffered a measurable financial loss.
- The Court drew a sharp contrast between legal damages and equitable disgorgement: damages are measured by the plaintiff's loss and aim to make the plaintiff whole, while disgorgement is measured by the defendant's wrongful gain and aims to strip the wrongdoer of unjust profits. Because the two remedies serve different functions, they carry different requirements.
- Surveying historical equity sources and precedents, the Court found that courts have consistently allowed disgorgement without any proof of the plaintiff's financial loss — so long as the defendant profited by invading the plaintiff's legally protected interests. Cases involving unauthorized cave tours, misused farm equipment, and exceeded mining easements all resulted in disgorgement awards despite the plaintiff suffering no monetary harm.
- The Court rejected the argument that Liu required proof of pecuniary loss. Liu said disgorgement must be 'awarded for victims,' but it drew that rule from equitable tradition — and equitable tradition defines a 'victim' as anyone whose legally protected interests were invaded, not only someone who lost money.
- The Court declined to resolve whether Congress's post-Liu addition of an express 'disgorgement' provision (§78u(d)(7)) freed the SEC from any equitable constraints, including the requirement to distribute recovered funds to victims rather than keep them. Assuming those constraints still apply, a pecuniary-loss requirement still does not exist.
- The Court acknowledged concern that the SEC might misuse disgorgement to collect penalties for the government rather than compensation for victims, noting that would raise separate and serious legal questions — including Seventh Amendment jury-trial issues flagged in SEC v. Jarkesy. But fear of future misuse did not justify grafting a pecuniary-loss requirement onto a remedy that never carried one.
Doctrinal impact
Cases affected by this decision
Reaffirms Liu v. SEC (591 U. S. 71)
Court reads Liu as requiring disgorgement be awarded for victims but not as requiring proof of their financial loss.
Distinguishes Kokesh v. SEC (581 U. S. 455)
Kokesh's penalty characterization was tied to the pre-Liu disgorgement practice; its reasoning does not control equitable disgorgement going forward.