Disgorgement
Sripetch v. SEC’
Date: June 4, 2026
Issue: Whether a showing of pecuniary loss to investors is required before the Securities and Exchange Commission may obtain a disgorgement award.
Case Summary: In a unanimous decision, the U.S. Supreme Court ruled that a showing of pecuniary loss to investors is not required before the SEC may obtain a disgorgement award.
Disgorgement is a legal remedy in which a wrongdoer is forced to surrender profits, ill-gotten gains, or assets obtained through illegal or unethical actions. Pecuniary loss refers to any financial harm or monetary disadvantage that can be measured, calculated, and quantified in exact financial terms. In 2020, the U.S. Supreme Court held in Liu v. SEC, that the SEC may seek disgorgement in federal enforcement actions. However, the Court limited those awards to a wrongdoer’s net profits and directed the SEC to return the recovered funds to harmed investors whenever feasible, rather than deposit them into the U.S. Treasury.
Ongkaruck Sripetch allegedly carried out multiple fraudulent schemes involving more than 20 penny-stock companies. On Sept. 21, 2020, the SEC filed a civil enforcement action against him, alleging six counts of securities fraud and one count of selling unregistered securities. Sripetch later consented to the entry of judgment and agreed that the district court could determine the amount of disgorgement. However, after the SEC sought more than $4.1 million in disgorgement, Sripetch objected, arguing the SEC failed to show his schemes caused investors to suffer financial losses. Specifically, he contended that no “victims” existed for whom the court could award disgorgement under Liu. The SEC responded that investors could qualify as “victims” under Liu, even if they suffered no pecuniary loss. Alternatively, the SEC argued that its evidence showed investors had suffered pecuniary loss as a result of Sripetch’s wrongdoing.
On April 17, 2024, Judge Marilyn L. Huff of the Southern District of California ruled for the SEC, concluding it presented sufficient evidence that investors suffered pecuniary loss. Because the court resolved the case on that basis, it did not decide whether Liu requires the SEC to prove pecuniary loss before obtaining disgorgement.
On appeal, the Ninth Circuit affirmed but held that the SEC need not prove that investors suffered pecuniary loss before obtaining disgorgement. That decision deepened a circuit split. While the First and Ninth Circuits allow the SEC to obtain disgorgement without proving investor financial loss, the Second Circuit required the SEC to make that showing. Sripetch petitioned the U.S. Supreme Court for review.
Writing the opinion, Justice Neil Gorsuch began by examining two provisions of the Securities Exchange Act of 1934 that govern the SEC’s authority to seek disgorgement. The Court explained that 15 U.S.C. § 78u(d)(5) authorizes courts to grant equitable relief for the benefit of investors and that Liu permits disgorgement under that provision only when it follows traditional equitable principles. The Court noted that Congress enacted 15 U.S.C. § 78u(d)(7) after Liu to expressly authorize the SEC to seek disgorgement in enforcement actions. However, the Court declined to decide whether the new provision changed the scope of the SEC’s disgorgement authority. Instead, the Court assumed that disgorgement remains an equitable remedy subject to traditional equitable limits and held that the SEC need not prove investors suffered pecuniary loss before obtaining disgorgement.
Next, the Court explained that courts have long used disgorgement to require wrongdoers to give up profits earned through unlawful conduct. This equitable remedy, according to the Court, targets the defendant’s unjust gains rather than the plaintiff’s financial losses. In effect, a plaintiff may recover a defendant’s wrongful profits without proving a measurable pecuniary loss. The Court also relied on longstanding legal treatises and historical case law, which recognize that equitable restitution protects legal rights by preventing wrongdoers from keeping the benefits of their misconduct rather than by compensating victims for economic harm.
Finally, the Court rejected Sripetch’s argument that Liu requires the SEC to prove investors suffered pecuniary loss before obtaining disgorgement. The Court explained Liu requires disgorgement to benefit victims, but it does not limit victims to those who suffered financial harm. In the Court’s view, disgorgement does not restore the status quo only when investors lose money; rather, equity restores the status quo by preventing wrongdoers from keeping profits obtained through unlawful conduct, even when victims suffer no measurable financial loss. Along with this, the Court rejected Sripetch’s concern that the SEC could use disgorgement to impose penalties rather than provide equitable relief. The Court concluded that any future misuse of the remedy would raise a separate question and would not justify adding a pecuniary-loss requirement that neither Liu nor traditional equitable principles recognize.
In concurrence, Justice Clarence Thomas agreed that the SEC may obtain disgorgement without proving investors suffered pecuniary loss. But he argued that Congress transformed disgorgement into a legal remedy when it amended the Securities Exchange Act to authorize disgorgement separately from equitable relief. For this reason, Justice Thomas opined that the Court should eventually examine whether the Seventh Amendment gives defendants the right to a jury trial when the SEC seeks disgorgement.
Bottom Line: The U.S. Supreme Court held that the SEC may obtain disgorgement without proving that investors suffered pecuniary loss.
Document: Opinion
