Supreme Court backs SEC disgorgement power in fraud case

Investing.com -- The U.S. Supreme Court ruled Thursday in favor of the Securities and Exchange Commission in a case that challenged the agency's authority to recover illegal profits through disgorgement.

The justices issued a 9-0 decision that upheld a lower court ruling supporting broad use of the SEC's disgorgement authority. The Trump administration defended the SEC in the case.

Defendant Ongkaruck Sripetch brought the challenge to the SEC's disgorgement power. A California court ordered Sripetch to repay more than $3 million in illegal gains and interest related to a financial fraud case at the agency's request.

The case did not dispute the SEC's general power to pursue disgorgement. Courts have long recognized this authority and Congress included it in federal law. The central question was whether the agency must demonstrate that victims suffered economic harm before seeking the surrender of illegal profits.

The SEC obtained around $1.4 billion through disgorgement in fiscal 2025 under Trump, according to agency figures that excluded certain sums. In the prior year under President Joe Biden, the SEC obtained $6.1 billion through disgorgement, representing almost three-fourths of its total financial penalties.

The SEC sought disgorgement in 2020 for illegal proceeds that Sripetch obtained through fraudulent means, including a pump-and-dump scheme that involved artificially inflating penny stock prices before selling his shares at a profit.

Sripetch admitted violating securities law and received a 21-month prison sentence in a related criminal case. He challenged the lower court's disgorgement order, arguing the SEC failed to prove his actions caused stock prices to drop or financially harmed investors.

Justice Department lawyers told the justices during April arguments that the SEC was not required to show that fraud inflicted financial harm before pursuing repayment through the courts.

A California federal judge sided with the SEC's broader interpretation of its disgorgement power in a ruling that the San Francisco-based 9th U.S. Circuit Court of Appeals upheld last year.

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