Supreme Court Set to Examine SEC Authority to Recover Unlawful Profits

Supreme Court to Review SEC’s Disgorgement Authority

Photo Credit: Saul Loeb/AFP/Getty Images

The United States Supreme Court has agreed to examine the extent of the Securities and Exchange Commission’s (SEC) ability to reclaim profits obtained through unlawful means—a decision that could significantly impact one of the agency’s primary enforcement mechanisms.

The Court will determine whether the SEC must demonstrate clear financial harm to investors before it can require individuals or companies found guilty of securities fraud to forfeit their illicit gains, a process known as “disgorgement.”

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Disgorgement has long been a favored legal remedy for the SEC, which in fiscal year 2024 secured over $6 billion in such orders, accounting for nearly 75% of its total financial sanctions. However, this figure plummeted to just $108 million in 2025, as reported by Cornerstone Research. Paul Atkins, who became SEC chairman under President Donald Trump, has consistently criticized large penalties against corporations. The SEC has yet to release its own enforcement statistics for 2025.

Unlike fines, which serve as punitive measures, disgorgement is intended to return unlawfully obtained profits to those harmed.

The Supreme Court will hear the appeal of Ongkaruck Sripetch, accused by the SEC of orchestrating multiple fraudulent schemes involving at least 20 penny-stock companies. In one instance, Sripetch allegedly purchased shares, arranged for a third party to promote the stock, and then sold his holdings after the price surged.

Sripetch agreed to a judgment but continued to contest the disgorgement amount. A federal judge ordered him to surrender $3.3 million in profits and interest, a decision upheld by the Ninth Circuit Court of Appeals.

In 2020, the Supreme Court affirmed the SEC’s authority to seek disgorgement, but limited its scope. The ruling stated that such awards must not exceed the wrongdoer’s net profits and should be distributed to victims.

Sripetch’s legal team argues that the 2020 decision means disgorgement is only appropriate when the SEC can prove measurable harm to investors. They contend that otherwise, wrongdoers could be penalized beyond what is necessary to compensate those affected.

Ongoing Legal Debate

Federal appeals courts are divided on whether the SEC must show “pecuniary harm.” While the Ninth Circuit ruled that such proof is unnecessary, the Second Circuit in New York has taken the opposite stance.

Despite the SEC’s more restrained use of disgorgement under Trump, U.S. Solicitor General D. John Sauer is urging the Supreme Court to reinforce the agency’s authority and not require evidence of direct financial loss to victims. Sauer maintains that disgorgement is focused on stripping profits from wrongdoers, regardless of whether victims have suffered quantifiable losses.

Both the administration and Sripetch have asked the Supreme Court to resolve the conflicting lower court decisions.

Separately, Sripetch has pleaded guilty to selling unregistered securities and received a 21-month prison sentence.

The Supreme Court is expected to hear arguments in April, with a decision likely by July.

Case Reference: Sripetch v. Securities and Exchange Commission, 25-466.

Reporting assistance by Nicola M White.

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