The U.S. Supreme Court has delivered another major ruling this week.
In a unanimous ruling that strengthens the Securities and Exchange Commission’s enforcement arsenal against securities fraud, the Supreme Court held that the agency does not need to prove investors suffered actual financial losses to obtain disgorgement of a wrongdoer’s profits.
The decision in Sripetch v. SEC, authored by Justice Neil Gorsuch, affirms the Ninth Circuit and resolves a circuit split in favor of broader SEC authority.
It comes as the agency continues to pursue aggressive actions against market manipulators, a tool conservatives have often supported when it targets clear fraudsters preying on everyday investors.
The case centered on Ongkaruck Sripetch, who participated in fraudulent “pump-and-dump” schemes involving at least 20 microcap penny-stock companies from 2013 to 2019.
Sripetch and associates would acquire shares, hype the stocks, then sell at inflated prices.
The SEC filed a civil enforcement action, and Sripetch consented to liability but challenged a roughly $2.25 million disgorgement order (plus interest), arguing the agency failed to show investors lost money as a result.
Writing for the 9-0 Court, Justice Gorsuch explained that traditional equitable principles — which govern disgorgement under statutes like 15 U.S.C. §§78u(d)(5) and 78u(d)(7) — focus on stripping the wrongdoer of unjust enrichment, not compensating specific out-of-pocket losses.
“Even assuming all that to be true, we conclude that a showing of pecuniary loss is not required before an investor may qualify as a victim of an offender’s wrongdoing entitled to compensation,” Gorsuch wrote.
He drew on longstanding equity precedents: “Under traditional equitable principles, a person seeking that kind of remedy does not need to prove he has ‘suffered a corresponding loss or,’ indeed, ‘any loss.’”
The remedy aims “to give to the plaintiff the amount by which he has been enriched” from invading protected interests.
The opinion distinguished disgorgement from damages, noting equity has long allowed recovery of a defendant’s gains even when victims suffered “no measurable loss whatsoever.”
Citing cases like Raven Red Ash Coal Co. v. Ball, Gorsuch illustrated how interference with legal rights justifies restitution based on the wrongdoer’s profit.
Justice Clarence Thomas filed a concurring opinion.
The ruling builds on the Court’s 2020 Liu v. SEC decision, which required disgorgement to be limited to net profits awarded for victims and tied to equitable principles.
Sripetch argued Liu demanded proof of pecuniary harm; the Court rejected that, clarifying Liu did not impose such a threshold.
This decision is a clear win for the SEC’s ability to combat fraud without the added evidentiary burden of tracing every investor’s losses.
In fiscal year 2024, the SEC secured a record disgorgement totaling billions.
Wednesday’s ruling removes a defense that could have hampered future cases.
The outcome prioritizes punishing fraudsters who violate investors’ protected interests over technical hurdles that might let schemers keep their spoils.
However, critics of expansive government power note that the ruling preserves limits: disgorgement must still target net profits that are causally linked to violations, and it cannot serve as a penalty that is funneled solely to the Treasury.
The case highlights ongoing tensions in securities regulation.
Legal observers say the ruling will streamline enforcement against bad actors in volatile markets, protecting retail investors who often bear the brunt of microcap scams.
Sripetch’s schemes allegedly enriched him at the expense of market integrity, even if pinpointing every dollar of investor harm proved elusive.
The Supreme Court’s firm stance reinforces that securities laws exist to deter deception, not create loopholes for the cunning.
As markets evolve with new technologies and schemes, this precedent equips regulators to act decisively while staying tethered to equitable traditions.
The Supreme Court’s term ends at the end of June.
