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Client Alert
The Supreme Court Confirms the SEC May Disgorge Ill-Gotten Gains Without Proving Investor Loss: Sripetch v. SEC
Supreme Court Confirms SEC Disgorgement Does Not Require Investor Loss
On June 4, 2026, a unanimous Supreme Court held in Sripetch v. SEC, No. 25-466, 608 U.S. ___ (2026), that the Securities and Exchange Commission (the SEC) may obtain disgorgement of a defendant’s ill-gotten gains in a civil enforcement action without proving that any investor suffered a financial loss. Writing for the Court, Justice Gorsuch resolved a circuit split that had developed after the Court’s 2020 decision in Liu v. SEC, under which disgorgement must be “awarded for victims.” The Court read that phrase to require only that the defendant invaded investors’ legally protected interests—not that those investors lost money. Justice Thomas concurred separately, pressing a question the majority declined to reach: whether statutory disgorgement is now a legal remedy that triggers the Seventh Amendment right to a jury trial.
The headline result was widely expected. The more consequential features of the decision are its narrowness and the questions it deliberately leaves open—both of which shape how the SEC will wield disgorgement going forward and how defendants should prepare to meet it. This alert reviews the legal background, the Court’s holding and reasoning, what remains unresolved, and the practical steps clients facing potential SEC exposure should take now.
Ongkaruck Sripetch orchestrated fraudulent schemes involving at least 20 penny-stock companies—classic “pump-and-dump” operations in which participants accumulate shares, promote them, and sell into the inflated price. He consented to entry of judgment on six counts of securities fraud and one count of selling unregistered securities, and agreed that the court could order disgorgement. When the SEC then sought more than $4.1 million, Sripetch objected, arguing that Liu barred the award because the SEC had not shown that his schemes caused investors any financial loss—and therefore, in his view, there were no “victims.” The district court found that loss had in fact been shown and did not decide whether such proof was required; the Ninth Circuit affirmed on the broader ground that pecuniary harm is not a prerequisite. The question before the Supreme Court was narrow: must the SEC prove investor pecuniary loss before obtaining disgorgement under Section 78u(d)(5) or Section 78u(d)(7)?
No Investor Loss Required
The Court’s Narrow Holding: Disgorgement Turns on Wrongful Gain, Not Investor Loss
The Court answered no, and did so on deliberately limited grounds. Rather than decide whether Section 78u(d)(7) frees the SEC from Liu’s equitable constraints, the Court assumed Liu applies and held that, even so, the “awarded for victims” requirement does not entail proof of financial harm. To be “awarded for victims,” the SEC must show that the defendant’s misconduct invaded investors’ legally protected interests—not that the invasion left them measurably poorer.
The reasoning is rooted in the nature of disgorgement itself. The remedy is directed at the wrongdoer, not the victim: its object is to compel a defendant to surrender gains he was never entitled to keep. Where a defendant enriches himself through fraud without leaving any particular investor financially worse off, equity’s preference, the Court explained, is to strip the wrongdoer of the proceeds of his misconduct rather than to let him retain them for want of a quantifiable loss. On that logic, the absence of demonstrable investor loss is not a defense to disgorgement; it simply changes who, if anyone, ultimately receives the funds.
Consistent with the Court’s incremental approach to securities remedies, Sripetch resolves one question while leaving several larger ones for another day. Three are worth flagging.
— The relationship between Section 78u(d)(5) and (d)(7). The Court did not decide whether the 2021 amendment left Liu’s equitable limits intact, supplemented them, or supplanted them. That unanswered question governs the outer bounds of the SEC’s disgorgement authority and continues to divide the lower courts.
— Treasury versus victims. The Court acknowledged—without resolving
— the long-running concern, left open in Liu, about when the SEC may direct disgorged funds to the U.S. Treasury rather than to harmed investors. By the SEC’s own reporting, the agency obtained orders to disgorge roughly $6.1 billion in fiscal year 2024 while returning only a fraction of that sum to investors. The agency and some commentators caution that the gap reflects the timing of collections, insolvent or absconding defendants, and the lag inherent in identifying and compensating victims rather than any policy of “pocketing” funds; critics read it differently. Whether large-scale disgorgement that does not reach victims is permissible remains genuinely unsettled after Sripetch.
— Legal or equitable—and the Seventh Amendment. If disgorgement under Section 78u(d)(7) is a legal remedy rather than an equitable one, it may carry a jury-trial right, echoing the Court’s 2024 decision in SEC v. Jarkesy, 603 U.S. ___ (2024), which required a jury for SEC civil-penalty claims. The majority did not engage the issue.
Justice Thomas, who dissented in Liu, wrote separately to argue that Congress’s 2021 amendments reclassified disgorgement as a legal remedy carrying a Seventh Amendment jury-trial right. His argument rests on three observations: that Congress placed disgorgement (Section 78u(d)(7)) in a separate provision from equitable relief (Section 78u(d)(5)) and gave each its own limitations period—a structure that would be superfluous if disgorgement were merely a species of equity; that SEC disgorgement bears little resemblance to traditional equitable devices such as constructive trusts, equitable liens, or accountings for profits, and instead resembles legal restitution historically tried at law; and that the agency’s practice of retaining most disgorged funds, rather than distributing them to victims, underscores the remedy’s legal character.
The lower courts are already split on the point—the Fifth Circuit has treated statutory disgorgement as legal in nature, while the Second Circuit has not—and Justice Thomas signaled that the Court will need to take up the question in a future case. For now, the issue is open, which is itself an opportunity for defendants in the right posture.
Summary
Practical implications for clients & how we can help?
Although framed narrowly, Sripetch has concrete consequences for how firms and individuals should assess and defend SEC exposure.
Measure exposure by gains, not losses.
The most immediate effect is that disgorgement risk is now keyed to what the defendant gained, not to what investors lost. Internal investigations and compliance reviews should identify and quantify profits attributable to potentially violative conduct even where no investor appears to have been harmed—and even where portfolio values later recovered or rose. This matters most in matters involving undisclosed conflicts, promotional or marketing arrangements, and trading-based conduct, where a “no-harm” narrative previously offered comfort.
The defenses that survive.
An argument that no one lost money will no longer defeat disgorgement. But Sripetch leaves a meaningful toolkit intact:
— Causation. Disgorgement remains confined to profits causally connected to the violation. Demonstrating that gains flowed from legitimate market activity rather than from the charged conduct directly reduces the recoverable amount.
— Net profits. The award is limited to net, not gross, profits. Disciplined documentation of legitimate business costs and expenses can materially shrink the calculation.
— Legally protected interests. The SEC must still identify conduct that invaded investors’ legally protected interests. Where a violation is technical—recordkeeping or procedural in nature—and implicates no such interest, disgorgement may be unavailable entirely.
— Compensation and the Treasury limits. Liu’s requirement that disgorgement benefit victims, and its (admittedly imprecise) limits on routing funds to the Treasury, survive and remain live defensive ground.
— The jury-trial right. Particularly in circuits that have not yet decided the question, and with Justice Thomas’s concurrence as support, defendants should consider asserting a Seventh Amendment jury-trial right where tactically advantageous and litigating it in earnest.
Bandi & Associates advises clients on SEC enforcement risk, internal investigations, and securities litigation strategy. In the wake of Sripetch, we can help quantify gain-based exposure before it becomes a liability, build the causation and net-profits record that constrains a disgorgement award, evaluate whether a contemplated SEC remedy implicates an unresolved jury-trial right, and position a matter to take advantage of the questions the Court left open. Please contact us to discuss how this decision affects your firm or a pending matter.
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