What happened
The US Supreme Court heard oral arguments on Sunday in Sripetch v. SEC, a case that could strip the Securities and Exchange Commission of its most powerful enforcement tool. The justices must decide whether the SEC can force defendants to surrender profits without first proving that specific investors lost money.
Why it matters: disgorgement accounted for more than $6 billion of the SEC’s financial remedies in fiscal 2024. A ruling against the agency could leave it unable to recover ill-gotten gains in insider trading, reporting violations, and market manipulation cases where harm is diffuse.
The circuit split
The case reached the Court because federal appeals courts disagree. The Second Circuit requires the SEC to demonstrate pecuniary harm to victims before obtaining disgorgement. The First and Ninth Circuits impose no such requirement.
Ongkaruck Sripetch orchestrated pump-and-dump schemes involving nearly 20 penny-stock companies through a website called Stockpalooza.com. A district court ordered him to disgorge $2.25 million plus interest without requiring the SEC to identify harmed investors.
The arguments
Sripetch’s lawyers argued that disgorgement is an equitable remedy available only to compensate identifiable victims, not to punish wrongdoers. The SEC countered that requiring proof of specific investor losses would effectively immunise fraudsters who targeted anonymous public markets.
Several justices appeared sceptical of both positions, questioning whether a middle ground might require the SEC to show some harm without identifying each victim individually.
What happens next
A decision is expected by late June. If the Court sides with Sripetch, the SEC would need to restructure how it pursues financial remedies in cases involving public markets. Congress could also act to grant explicit disgorgement authority, as it partially did after the Court’s 2020 decision in Liu v. SEC limited disgorgement to net profits.