SEC’s power to seize ill-gotten gains hinges on whether profits alone justify disgorgement

The Securities and Exchange Commission can force a wrongdoer to surrender profits from illegal trading—but only if the courts agree that those gains can be seized without proving anyone lost money. That question now sits before the Supreme Court in *Sripetch v SEC*, where more than $6 million in civil disgorgement hangs in the balance.

Ongkaruck Sripetch pleaded guilty to selling unregistered securities and was sentenced to 21 months in prison. In a parallel civil case, the SEC moved to strip him of over $6 million in profits from those transactions. The lower court approved the penalty without requiring the SEC to show that investors suffered financial losses—a point other appeals courts have insisted upon when enforcing disgorgement.

Sripetch contends the Court’s 2020 ruling in *Liu v SEC* demands such proof. In *Liu*, the justices held that disgorgement must serve as compensation to defrauded investors, not as a freestanding penalty. That decision emphasized that the remedy’s purpose is “fair compensation to the person wronged,” a principle Sripetch says cannot apply without identifiable harm.

The SEC counters that disgorgement has long operated as a remedy targeting the wrongdoer’s gain, not the victim’s loss. As long as the agency limits recovery to profits directly tied to illegal conduct, it argues, the remedy fits within established equitable traditions. Supporting this view, a group of remedies scholars—including leading restitution expert Douglas Laycock—submitted an amicus brief affirming that classical disgorgement focuses solely on ill-gotten gains.

But skepticism lingers among justices who have previously questioned the SEC’s expansive use of equitable powers. The ruling will define whether the agency can bypass harm calculations in future cases—or whether disgorgement now requires a victim with measurable losses.