Supreme Court strengthens SEC power to claw back fraud profits from violators

The SEC just got a bigger stick: the Supreme Court ruled it can claw back fraud profits without proving investors lost a dime. 

On June 4, 2026, the justices ruled unanimously in Sripetch v. SEC that the agency does not need to show investors suffered financial losses before forcing a wrongdoer to hand over profits. The decision resolves a split among the federal appeals courts and removes a line of defense securities defendants had used to fight disgorgement – the legal term for requiring someone to give back money earned illegally. 

The case started with penny stocks. Ongkaruck Sripetch ran numerous fraudulent schemes across at least 20 penny-stock companies. Some were classic pump-and-dump operations in which Sripetch and his co-conspirators obtained shares in those companies, promoted them to others, watched the share price rise, and then promptly sold. The SEC sued, charging him with six counts of securities fraud and one count of selling unregistered securities. Sripetch consented to judgment and agreed the court could order disgorgement. 

The dispute was over the amount. When the SEC sought over $4.1 million, Sripetch pushed back. He pointed to a 2020 Supreme Court precedent, Liu v. SEC, which held that disgorgement must be directed toward victims. His argument: no proof of investor losses, no victims, no disgorgement. 

The Court rejected that reasoning. Writing for the full bench, Justice Gorsuch traced disgorgement back to longstanding principles of equity – the branch of law focused on fairness rather than exact financial harm. Under those principles, a wronged party can recover a wrongdoer's gains even without proving financial loss. The goal is to strip the bad actor of what he unjustly pocketed, not to repay a specific dollar amount. An investor can qualify as a victim without a provable financial hit. 

The practical takeaway for compliance officers and firm principals is direct. The ruling removes a tool defense lawyers had used to shrink or block disgorgement awards. The SEC can now pursue ill-gotten gains across a wider range of enforcement situations, including ones where calculating exact investor losses is difficult or impossible. The profit a securities violation generates is fully on the table, whether or not investor harm can ever be totaled up. 

One issue worth watching. Justice Thomas wrote separately to argue that disgorgement has become a legal remedy rather than an equitable one – a distinction that matters because legal remedies carry a constitutional right to jury trial. Drawing on figures from an amicus brief, Thomas noted the SEC obtained orders to disgorge $6.1 billion in 2024 while returning only $345 million to victims, and called that closer to a fines regime than victim compensation. No other justice joined him, but Thomas signaled the Court will need to address the jury-trial question in a future case. 

For now, the SEC's enforcement reach is wider. The argument that disgorgement requires proof of investor losses is gone.