Supreme Court: SEC can recover illegal gains without proving investor loss
In brief
- Supreme Court unanimously ruled SEC can recover illegal gains without proving investor loss in Sripetch v. SEC.
- Justice Neil Gorsuch wrote the opinion for all nine justices, rejecting disgorgement harm-proof requirements.
- The ruling resolves a circuit split on the SEC's disgorgement authority across federal courts.
- SEC collected over $6.1 billion in disgorgement and prejudgment interest in fiscal year 2024.
The case and the ruling
The case centered on Ongkaruck Sripetch, who was tied to a penny-stock fraud scheme. The Ninth Circuit had previously upheld an order requiring him to disgorge approximately $2 million in illicit profits. Sripetch's legal team argued the SEC must prove that specific investors suffered actual losses before forcing disgorgement. Justice Neil Gorsuch, writing for all nine justices, rejected that argument entirely.
The decision resolves a long-standing circuit split. The Ninth and First Circuits had sided with the SEC's position while the Second Circuit imposed a higher bar requiring proof of victim harm. That inconsistency created unpredictable outcomes across the country. Now, the SEC's authority is settled nationwide.
Impact on enforcement and crypto
The ruling significantly strengthens the SEC's financial enforcement toolkit. In fiscal year 2024, the SEC collected over $6.1 billion in disgorgement and prejudgment interest. That figure underscores how central this power is to the agency's work.
For crypto projects with token sales later deemed unregistered securities offerings, the implications are direct. The SEC can now calculate the issuer's profits and seek recovery without tracking down individual token buyers to demonstrate losses. This streamlines enforcement and reduces litigation over causation.
Notably, the Trump administration defended the SEC in this case, signaling bipartisan agreement on the agency's core enforcement powers. Oral arguments were heard on April 20, and the decision came roughly six weeks later.
The ruling reflects a straightforward principle: wrongdoers shouldn't keep profits from illegal sales, regardless of whether individual victims can prove specific losses. That clarity benefits both the SEC's enforcement strategy and the broader predictability of securities law.
