The U.S. Supreme Court has delivered another major ruling this week.<\/p>\n
In a unanimous ruling that strengthens the Securities and Exchange Commission\u2019s 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\u2019s profits.<\/p>\n
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.<\/p>\n
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.<\/p>\n
The case centered on Ongkaruck Sripetch, who participated in fraudulent \u201cpump-and-dump\u201d schemes involving at least 20 microcap penny-stock companies from 2013 to 2019.<\/p>\n
Sripetch and associates would acquire shares, hype the stocks, then sell at inflated prices.<\/p>\n
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.<\/p>\n
Writing for the 9-0 Court, Justice Gorsuch explained that traditional equitable principles \u2014 which govern disgorgement under statutes like 15 U.S.C. \u00a7\u00a778u(d)(5) and 78u(d)(7) \u2014 focus on stripping the wrongdoer of unjust enrichment, not compensating specific out-of-pocket losses.<\/p>\n
\u201cEven 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\u2019s wrongdoing entitled to compensation,\u201d Gorsuch wrote.<\/p>\n
He drew on longstanding equity precedents: \u201cUnder traditional equitable principles, a person seeking that kind of remedy does not need to prove he has \u2018suffered a corresponding loss or,\u2019 indeed, \u2018any loss.’\u201d<\/p>\n
The remedy aims \u201cto give to the plaintiff the amount by which he has been enriched\u201d from invading protected interests.<\/p>\n
The opinion distinguished disgorgement from damages, noting equity has long allowed recovery of a defendant\u2019s gains even when victims suffered \u201cno measurable loss whatsoever.\u201d<\/p>\n
Citing cases like Raven Red Ash Coal Co. v. Ball, Gorsuch illustrated how interference with legal rights justifies restitution based on the wrongdoer\u2019s profit.<\/p>\n