Supreme Court Backs SEC’s Power to Seek Disgorgement in Fraud Cases

The Supreme Court upheld the SEC’s authority to seek disgorgement in securities fraud cases.

On June 4, 2026, the U.S. Supreme Court clarified and strengthened the Securities and Exchange Commission’s authority to seek disgorgement in enforcement actions. The unanimous ruling, authored by Justice Neil Gorsuch, held that the SEC may obtain disgorgement from wrongdoers even without proving that investors suffered direct financial losses. Instead, it is sufficient that the defendant profited from illegal securities transactions.

This case involved Ongkaruck Sripetch, who pleaded guilty to selling unregistered high-risk penny stocks. He was sentenced to 21 months in prison and ordered to disgorge over $3 million. The Court held that these profits could be returned to defrauded investors, providing a clear path for victim compensation.

Justice Gorsuch noted, “An investor may qualify as a victim of an offender's wrongdoing entitled to compensation.” The ruling reinforces the SEC's ability to recover illicit gains, an important aspect of its enforcement toolkit.

This decision builds on the 2017 Kokesh v. SEC ruling, which classified disgorgement as subject to a five-year statute of limitations, and the 2020 Liu v. SEC decision, which set limits on disgorgement to net profits used for victim benefit.

Legal counsel and compliance professionals at corporations and law firms should review and potentially adjust their risk management and enforcement strategies in response to this reaffirmed and somewhat expanded enforcement power.