In a unanimous decision issued last week, the US Supreme Court held in Sripetch v. Securities and Exchange Commission[1] that the SEC need not prove that investors suffered actual financial losses to obtain a disgorgement award. The decision marks a significant victory for the SEC, as the Court declined to narrow one of the agency’s most powerful enforcement remedies. Nevertheless, the Court left open questions that give defendants in SEC enforcement actions potential avenues to challenge disgorgement requests.
Background
Disgorgement is one of the SEC’s most powerful enforcement tools. Since 2021, the SEC has obtained approximately $41 billion in total financial remedies, of which nearly $25 billion consisted of disgorgement and prejudgment interest.[2] For decades, the SEC’s disgorgement authority largely went unchallenged, but that has changed recently. The Court’s decision in Sripetch marks the third time the Court has addressed the SEC’s disgorgement authority in the past decade.
In Kokesh v. SEC,[3] the Court ruled that disgorgement is subject to a five-year statute of limitations, regardless of how long the fraud had been running, and it expressly declined to decide whether courts had the authority to order disgorgement at all. The Court later took up that issue in Liu v. SEC.[4] While the Court in Liu confirmed that the SEC may seek disgorgement as a remedy in enforcement actions, it imposed guardrails. Specifically, the Court held that disgorgement awards may not exceed a defendant’s net profits, must be “awarded for victims” rather than deposited to the US Treasury, and one defendant generally cannot be held responsible for another’s gains.
Congress responded to Liu by enacting 15 U.S.C. § 78u(d)(7) which expressly authorized disgorgement as a statutory remedy. The statute, however, did not clarify whether the newly authorized remedy remained subject to the limitations Liu imposed — in particular, whether section 78u(d)(7) permits the government to retain disgorgement proceeds rather than distribute them to victims. Nor did the statute resolve another key ambiguity left by Liu: whether an individual qualifies as a “victim” absent proof of financial loss. In the ensuing years, circuit courts of appeals have split on both questions. And although Sripetch presented the Supreme Court with the opportunity to resolve them, as discussed below, the Court addressed only the latter.
The Sripetch Decision
Ongkaruck Sripetch operated numerous penny-stock frauds, using classic pump-and-dump schemes involving at least 20 companies. The SEC charged him with six counts of securities fraud and one count of selling unregistered securities. Sripetch consented to a judgment and agreed that the court could order disgorgement but objected when the SEC sought more than $4.1 million.
Sripetch argued that because the SEC did not present evidence that investors suffered actual financial losses, there were no “victims” to support a disgorgement award under Liu and that disgorgement was therefore inappropriate. The Ninth Circuit rejected that argument, holding that proof of financial loss is not a prerequisite for disgorgement — a decision directly at odds with the Second Circuit’s 2023 holding in SEC v. Govil.[5] The Supreme Court granted certiorari.
Justice Gorsuch, writing for a unanimous Court, held that proof of pecuniary loss to investors is not required for the SEC to obtain a disgorgement award. Drawing on a century of precedent, the Court reasoned that disgorgement is fundamentally different from an award of damages: damages are measured by the plaintiff’s loss and are designed to make the victim whole, whereas disgorgement is measured by the defendant’s gain. Because the remedy exists to strip a defendant of unjust profits — not to compensate the defendant’s victims — the absence of proven investor loss does not bar the award of disgorgement. Disgorgement’s purpose is to ensure that a fraudster does not get to keep their ill-gotten profits.
Justice Thomas concurred but wrote separately to raise a significant question: whether disgorgement under § 78u(d)(7) is a legal remedy that triggers the Seventh Amendment right to a jury trial. He argued that statutory disgorgement bears little resemblance to traditional equitable remedies and therefore now is a legal remedy that for which the Seventh Amendment requires a jury trial. It is unclear whether or when the Court may take this issue up, but there is currently a split between the Fifth and Second Circuits.[6]
Key Takeaways
A Win for the SEC After a Decade of Supreme Court Setbacks. Sripetch marks the SEC’s first Supreme Court victory on a contested enforcement question in nearly a decade. Kokesh constrained disgorgement through the statute of limitations; Liu limited award calculations and required victim distribution; and Jarkesy[7]stripped the SEC of the ability to impose civil penalties in its administrative proceedings. Sripetch’s unanimous ruling breaks that streak. With disgorgement and prejudgment interest generating $10.8 billion in fiscal year 2025 alone,[8] disgorgement remains the SEC’s most significant monetary remedy.
Unanswered Questions Leave Open Important Defenses. The Court’s opinion leaves several important questions for future litigation. For instance, the Court declined to decide whether the new statutory disgorgement provision carries the same guardrails Liu imposed, including the requirement that awards go to victims rather than the Treasury. This leaves open challenges by defendants when the SEC lacks a credible distribution plan or claims distribution of recoveries is infeasible. Further, given the questions raised by Justice Thomas’ concurrence, defendants should consider demanding a jury trial in disgorgement proceedings. Last, in Sripetch, the Court discussed that equitable disgorgement is based on a defendant’s interference with a victim’s legally protected interests. This leaves open potential challenges in cases where the SEC cannot identify the violation of a legally protected interest of an alleged victim.
Conclusion
While current SEC Chairman Paul Atkins has made clear that the Commission will continue to principally prioritize enforcement cases involving genuine investor harm, companies and individuals under SEC investigation or facing enforcement action should remain mindful that the SEC may continue to pursue disgorgement even in cases where investor losses are difficult to quantify or prove. The questions left open will merit close attention as enforcement litigation develops.
*Bracewell summer associate Chloe Obert provided invaluable assistance with this client alert.
[1] 608 U.S. ___.
[2] The aggregate figures are calculated from the SEC’s annual enforcement results for fiscal years 2021–2025. See SEC Announces Enforcement Results for Fiscal Year 2025 (Apr. 7, 2026); SEC Announces Enforcement Results for Fiscal Year 2024 (Nov. 22, 2024); SEC Announces Enforcement Results for Fiscal Year 2023 (Nov. 14, 2023); SEC Announces Enforcement Results for FY 2022 (Nov. 15, 2022); SEC Announces Enforcement Results for FY 2021 (Nov. 18, 2021).
[3] 581 U.S. 455 (2017).
[4] 591 U.S. 71 (2020).
[5] 86 F. 4th 89 (2023).
[6] Compare SEC v. Hallam, 42 F. 4th 316, 341 (5th Cir. 2022), with SEC v. Ahmed, 72 F. 4th 379, 395 (2d Cir. 2023).
[7] 603 U.S. 109 (2024).
[8] See SEC Announces Enforcement Results for Fiscal Year 2025 (Apr. 7, 2026).
