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Over the past decade, the United States Supreme Court has provided increasing definition of the scope of the Securities and Exchange Commission’s (SEC’s) authority to direct disgorgement of ill-gotten gains in federal securities-law cases. In 2017, in Kokesh v. SEC, the Court held that the SEC’s use of disgorgement to require payments to the United States Treasury, and to obtain funds that exceeded the defendant’s ill-gotten gains, constituted a civil penalty subject to a five-year statute of limitations.[1]
In 2020, in Liu v. SEC, the Court acknowledged that while Congress had given the SEC statutory authority to obtain “any equitable relief that may be appropriate or necessary for the benefit of investors”, that remedy extended only to a defendant’s net profits (not total revenues) derived from his securities-law violations, and that whatever amounts the SEC secured must be “awarded for victims.”[2]
Recently, in Sripetch v. United States, the Supreme Court unanimously held that as a condition of securing disgorgement, the SEC was not required to prove that victims of the securities-law violation have suffered pecuniary loss. This post will summarize the background of Sripetch and the Court’s reasoning and provide some observations.
In 2020, the SEC filed a civil enforcement action against Ongkaruck Sripetch and fourteen other defendants. It alleged that the defendants “worked in concert to engage in numerous fraudulent schemes and other violations of the federal securities laws, involving at least 20 penny stock companies,” and that they “obtained at least $6 million in illicit sale proceeds from this illegal conduct.” The SEC sought, among other remedies, an order requiring the defendants “to disgorge all ill-gotten gains” obtained because of the alleged violations.[3]
Sripetch initially consented to the entry of judgment against him and to an order of disgorgement of ill-gotten gains and prejudgment interest thereon. But after the SEC sought an order requiring him to disgorge more than $4 million in ill-gotten gains, Sripetch opposed the SEC’s motion, arguing that disgorgement under 15 U.S.C. § 78u(d) requires a finding that victims suffered pecuniary harm. The district court assumed without deciding that a finding of pecuniary harm was required and concluded that the SEC had made the requisite showing.[4]
On appeal, the U.S. Court of Appeals for the Ninth Circuit held that a finding of pecuniary harm was not required, following the reasoning of the First Circuit and rejecting the reasoning of the Second Circuit.[5] Because that decision “deepened a split among the court of appeals,” the Supreme Court granted certiorari specifically“ to resolve that disagreement.”[6]
In their briefs, Sripetch and the SEC focused on whether, in actions under 15 U.S.C. § 78u(d)(7) (generally authorizing the SEC to see and a court to order disgorgement), the SEC is required to connect the unlawful profits it seeks to any specific victims and whether the government may keep disgorgement awards for itself. Writing for a unanimous Court, Justice Gorsuch reproved both parties, stating, “The only question we took this case to resolve is whether the SEC must show that an investor suffered a pecuniary loss before it may secure a disgorgement remedy under either [15 U.S.C.] §78u(d)(5) or §78u(d)(7).”[7]
Justice Gorsuch first contrasted the legal remedy of damages with the equitable remedy of disgorgement. While damages are ordinarily measured by the plaintiff’s loss, in equity “the final award to the plaintiff is not measured by his loss but by the defendant’s gain attributable to his wrongdoing against the plaintiff.” After reviewing a variety of cases involving disgorgement, he concluded that “[w]hatever else traditional equitable principles demand, they do not require a showing of pecuniary loss before a court may issue an award of unjust profits.”[8]
Sripetch also argued that Liu precluded a conclusion that a showing of pecuniary loss is not required for disgorgement, but Justice Gorsuch stated that such a requirement was “foreign to Liu and to traditional equitable principles alike.”[9]
Sripetch certainly resolves one of the key issues associated with securities law-related disgorgement. As the Court’s opinion made clear, the Court did not resolve two other disgorgement issues: whether the SEC may seek disgorgement when it is infeasible to distribute the collected funds to investors; and what showing the Commission might have to make to prove infeasibility.[10]
Nonetheless, counsel advising clients in SEC investigations will need to anticipate, in negotiations with the SEC staff, that the staff will now routinely require disgorgement as a condition of settlement. Should a client decide to contest the investigation and the SEC indicates its intention to litigate, however, a significant issue that Sripetch did not decide is whether, in a trial in which the SEC would seek disgorgement, the defendant has a right to a jury trial.
Just two years ago, in Securities and Exchange Commission v. Jarkesy, the Supreme Court held that when the SEC seeks civil penalties against a defendant for securities fraud, the Seventh Amendment entitles the defendant to a jury trial.[11] In a concurring opinion in Sripetch, Justice Thomas maintained that “[t]he Seventh Amendment requires a jury trial when the SEC seeks disgorgement because Congress has now made disgorgement a legal remedy, not an equitable one.”[12]
Although the Court in Sripetch did not need to address that issue directly, it should be noted that the Court’s opinion briefly cited Jarkesy in subtly admonishing the SEC against “seek[ing] to depart from traditional equitable principles and attempt[ing] to use §78u(d)(7) to secure penalties.”[13] Practitioners should expect that the SEC will take that hint and confine itself to the authority that Sripetch gives it.
[1] 581 U. S. 455, 458 (2017).
[2] 591 U. S. 71 (2020).
[3] United States Securities and Exchange Commission v. Sripetch, 154 F.4th 980, 984-985 (9th Cir. 2025), aff’d, 608 U. S. ____ (2026).
[4] Id. 985.
[5] Id.
[6] Sripetch v. Securities and Exchange Commisssion, No. 25–466, slip op. at 6 (U.S. Supreme Court, June 4, 2026), https://www.supremecourt.gov/opinions/25pdf/25-466_5i26.pdf.
[7] Id. 7.
[8] Id. 9-11.
[9] Id. 13.
[10] Id. 3-4.
[11] 603 U. S. 109 (2024).
[12] Sripetch, slip op. at 3 (Thomas, J., concurring).
[13] Sripetch, slip op. at 12.
Jonathan J. Rusch is the Director of the U.S. and International Anti-Corruption Law Program and an Adjunct Professor at American University Washington College of Law and a Senior Fellow with the NYU Program on Corporate Compliance and Enforcement at New York University Law School.
The views, opinions and positions expressed within all posts are those of the author(s) alone and do not represent those of the Program on Corporate Compliance and Enforcement (PCCE) or of the New York University School of Law. PCCE makes no representations as to the accuracy, completeness and validity or any statements made on this site and will not be liable any errors, omissions or representations. The copyright of this content belongs to the author(s) and any liability with regards to infringement of intellectual property rights remains with the author(s).
Photo courtesy of author
Over the past decade, the United States Supreme Court has provided increasing definition of the scope of the Securities and Exchange Commission’s (SEC’s) authority to direct disgorgement of ill-gotten gains in federal securities-law cases. In 2017, in Kokesh v. SEC, the Court held that the SEC’s use of disgorgement to require payments to the United States Treasury, and to obtain funds that exceeded the defendant’s ill-gotten gains, constituted a civil penalty subject to a five-year statute of limitations.[1]
In 2020, in Liu v. SEC, the Court acknowledged that while Congress had given the SEC statutory authority to obtain “any equitable relief that may be appropriate or necessary for the benefit of investors”, that remedy extended only to a defendant’s net profits (not total revenues) derived from his securities-law violations, and that whatever amounts the SEC secured must be “awarded for victims.”[2]
Recently, in Sripetch v. United States, the Supreme Court unanimously held that as a condition of securing disgorgement, the SEC was not required to prove that victims of the securities-law violation have suffered pecuniary loss. This post will summarize the background of Sripetch and the Court’s reasoning and provide some observations.
In 2020, the SEC filed a civil enforcement action against Ongkaruck Sripetch and fourteen other defendants. It alleged that the defendants “worked in concert to engage in numerous fraudulent schemes and other violations of the federal securities laws, involving at least 20 penny stock companies,” and that they “obtained at least $6 million in illicit sale proceeds from this illegal conduct.” The SEC sought, among other remedies, an order requiring the defendants “to disgorge all ill-gotten gains” obtained because of the alleged violations.[3]
Sripetch initially consented to the entry of judgment against him and to an order of disgorgement of ill-gotten gains and prejudgment interest thereon. But after the SEC sought an order requiring him to disgorge more than $4 million in ill-gotten gains, Sripetch opposed the SEC’s motion, arguing that disgorgement under 15 U.S.C. § 78u(d) requires a finding that victims suffered pecuniary harm. The district court assumed without deciding that a finding of pecuniary harm was required and concluded that the SEC had made the requisite showing.[4]
On appeal, the U.S. Court of Appeals for the Ninth Circuit held that a finding of pecuniary harm was not required, following the reasoning of the First Circuit and rejecting the reasoning of the Second Circuit.[5] Because that decision “deepened a split among the court of appeals,” the Supreme Court granted certiorari specifically“ to resolve that disagreement.”[6]
In their briefs, Sripetch and the SEC focused on whether, in actions under 15 U.S.C. § 78u(d)(7) (generally authorizing the SEC to see and a court to order disgorgement), the SEC is required to connect the unlawful profits it seeks to any specific victims and whether the government may keep disgorgement awards for itself. Writing for a unanimous Court, Justice Gorsuch reproved both parties, stating, “The only question we took this case to resolve is whether the SEC must show that an investor suffered a pecuniary loss before it may secure a disgorgement remedy under either [15 U.S.C.] §78u(d)(5) or §78u(d)(7).”[7]
Justice Gorsuch first contrasted the legal remedy of damages with the equitable remedy of disgorgement. While damages are ordinarily measured by the plaintiff’s loss, in equity “the final award to the plaintiff is not measured by his loss but by the defendant’s gain attributable to his wrongdoing against the plaintiff.” After reviewing a variety of cases involving disgorgement, he concluded that “[w]hatever else traditional equitable principles demand, they do not require a showing of pecuniary loss before a court may issue an award of unjust profits.”[8]
Sripetch also argued that Liu precluded a conclusion that a showing of pecuniary loss is not required for disgorgement, but Justice Gorsuch stated that such a requirement was “foreign to Liu and to traditional equitable principles alike.”[9]
Sripetch certainly resolves one of the key issues associated with securities law-related disgorgement. As the Court’s opinion made clear, the Court did not resolve two other disgorgement issues: whether the SEC may seek disgorgement when it is infeasible to distribute the collected funds to investors; and what showing the Commission might have to make to prove infeasibility.[10]
Nonetheless, counsel advising clients in SEC investigations will need to anticipate, in negotiations with the SEC staff, that the staff will now routinely require disgorgement as a condition of settlement. Should a client decide to contest the investigation and the SEC indicates its intention to litigate, however, a significant issue that Sripetch did not decide is whether, in a trial in which the SEC would seek disgorgement, the defendant has a right to a jury trial.
Just two years ago, in Securities and Exchange Commission v. Jarkesy, the Supreme Court held that when the SEC seeks civil penalties against a defendant for securities fraud, the Seventh Amendment entitles the defendant to a jury trial.[11] In a concurring opinion in Sripetch, Justice Thomas maintained that “[t]he Seventh Amendment requires a jury trial when the SEC seeks disgorgement because Congress has now made disgorgement a legal remedy, not an equitable one.”[12]
Although the Court in Sripetch did not need to address that issue directly, it should be noted that the Court’s opinion briefly cited Jarkesy in subtly admonishing the SEC against “seek[ing] to depart from traditional equitable principles and attempt[ing] to use §78u(d)(7) to secure penalties.”[13] Practitioners should expect that the SEC will take that hint and confine itself to the authority that Sripetch gives it.
[1] 581 U. S. 455, 458 (2017).
[2] 591 U. S. 71 (2020).
[3] United States Securities and Exchange Commission v. Sripetch, 154 F.4th 980, 984-985 (9th Cir. 2025), aff’d, 608 U. S. ____ (2026).
[4] Id. 985.
[5] Id.
[6] Sripetch v. Securities and Exchange Commisssion, No. 25–466, slip op. at 6 (U.S. Supreme Court, June 4, 2026), https://www.supremecourt.gov/opinions/25pdf/25-466_5i26.pdf.
[7] Id. 7.
[8] Id. 9-11.
[9] Id. 13.
[10] Id. 3-4.
[11] 603 U. S. 109 (2024).
[12] Sripetch, slip op. at 3 (Thomas, J., concurring).
[13] Sripetch, slip op. at 12.
Jonathan J. Rusch is the Director of the U.S. and International Anti-Corruption Law Program and an Adjunct Professor at American University Washington College of Law and a Senior Fellow with the NYU Program on Corporate Compliance and Enforcement at New York University Law School.
The views, opinions and positions expressed within all posts are those of the author(s) alone and do not represent those of the Program on Corporate Compliance and Enforcement (PCCE) or of the New York University School of Law. PCCE makes no representations as to the accuracy, completeness and validity or any statements made on this site and will not be liable any errors, omissions or representations. The copyright of this content belongs to the author(s) and any liability with regards to infringement of intellectual property rights remains with the author(s).
