U.S. Supreme Court Rejects Investor Loss Requirement For SEC Disgorgement

On June 4, 2026, the U.S. Supreme Court unanimously held in Sripetch v. Securities and Exchange Commission that the SEC may obtain disgorgement without proving that investors suffered financial loss under provisions governing the remedies available in actions and proceedings brought by the Commission under the securities law. Justice Gorsuch, writing for the Court, grounded the decision in traditional equitable principles, explaining that disgorgement has always been measured by the defendant’s wrongful gain, not the victim’s loss. The ruling resolves a circuit split in the SEC’s favor and forecloses one of the principal arguments defendants have used to defeat or limit disgorgement awards. But Justice Thomas’s concurrence may matter more in the long run. Writing separately, he argued that the Court should soon address whether disgorgement is now a legal remedy that triggers the Seventh Amendment right to a jury trial. If it does, then the SEC might be more hesitant to seek disgorgement in cases not otherwise requiring a jury trial.

Background

Sripetch is the third time in a decade that the Supreme Court has addressed SEC disgorgement. In Kokesh v. SEC (2017), the Court held that disgorgement is a “penalty” subject to the five-year statute of limitations in 28 U.S.C. § 2462, but did not address whether courts could award disgorgement to the SEC at all. In Liu v. SEC (2020), the Court answered that disgorgement is permissible as “equitable relief” under Section 78u(d)(5) of the Exchange Act, but must be capped at the defendant’s net profits, awarded for victims, and not imposed through joint-and-several liability against those who did not participate in the wrongdoing. Justice Thomas dissented, arguing that disgorgement is not a traditional equitable remedy.

Six months after Liu, in 2021, Congress added Section 78u(d)(7) to the Exchange Act, expressly authorizing the SEC to seek “disgorgement” and enacting new statutes of limitations. A circuit split followed. The Second Circuit held that Liu’srequirement that disgorgement be “awarded for victims” presupposed financial loss. The First and Ninth Circuits disagreed, holding that disgorgement is measured by the defendant’s profits regardless of whether investors lost money.

The facts

Ongkaruck Sripetch orchestrated pump-and-dump and other fraudulent schemes involving at least 20 penny-stock companies. The SEC brought a civil enforcement action, and Sripetch consented to judgment. But he objected when the SEC sought more than $4.1 million in disgorgement, arguing that, under Liu, the SEC could not obtain disgorgement without evidence that his schemes caused investors any financial losses. The Ninth Circuit held that proof of financial harm was not required.

The majority opinion

Justice Gorsuch, writing for a unanimous Court, affirmed. The opinion was deliberately narrow. Rather than resolve whether the 2021 amendments changed the equitable nature of SEC disgorgement, the Court assumed without deciding that disgorgement under Section 78u(d)(7) “remains an equitable remedy” subject to “traditional equitable rules, including the rule that disgorgement must be awarded for victims.” Even on that assumption, the Court concluded, “a showing of pecuniary loss is not required before an investor may qualify as a victim of an offender’s wrongdoing entitled to compensation.”

The opinion’s core distinction is between loss-based and gain-based remedies. Damages compensate the plaintiff for what was lost, whereas equitable remedies, like disgorgement, have historically been intended to strip the defendant of what was gained. Drawing on the Restatement (Third) of Restitution and Unjust Enrichment, Justice Gorsuch emphasized that when a person “has suffered an interference with protected interests,” he may be entitled to restitution of the defendant’s wrongful gain “even when he has suffered no measurable loss whatsoever.”

The Court rejected Sripetch’s counterarguments. He contended that Liu had already announced a rule requiring proof of financial loss. The Court disagreed, explaining that, while Liu held that disgorgement must be “awarded for victims,” it drew that requirement from traditional equitable principles that do not require financial loss to qualify as a “victim.”

Sripetch also argued that permitting disgorgement without proof of pecuniary loss was inconsistent with Liu’s description of disgorgement as a remedy designed to “restore the status quo.” Justice Gorsuch’s answer was direct. In some cases, “a defendant can unjustly enrich himself even without leaving a plaintiff worse off financially.” In those circumstances, “a court must choose between two status quos: It can either restore the defendant to his prior position by stripping him of his unjust gains, or it can allow the defendant to benefit from his misconduct because the plaintiff’s financial position has not changed.” The Court held that equity prefers the first outcome.

Sripetch also warned that, without a financial-loss requirement, the SEC might seek disgorgement for the Treasury’s benefit rather than to compensate victims. Justice Gorsuch acknowledged that such a development “would raise questions” about Section 78u(d)(7)’s scope, but held that this possibility did not justify imposing a “requirement foreign to Liu and to traditional equitable principles alike.”

Justice Thomas’s concurrence

Justice Thomas joined the majority but wrote separately, arguing that the Court dodged the bigger question: whether Congress has converted disgorgement into a legal remedy that triggers the Seventh Amendment right to a jury trial.

In his view, SEC disgorgement does not resemble any traditional equitable remedy. It does not correspond to constructive trusts, equitable liens, or an accounting for profits. The wrongdoer “is not necessarily or even ordinarily the victim’s fiduciary” and “disgorges” his gains not to his victim but instead “to the SEC, a Government enforcement agency.” SEC disgorgement thus, in Justice Thomas’s view, more closely resembles legal restitution.

Justice Thomas also pointed to the 2021 amendments as further support that disgorgement is a legal remedy. First, the very fact that Congress expressly authorized disgorgement in statute points to it being a legal remedy. Second, the statute now “twice distinguishes between disgorgement and equitable remedies” and sets different limitations periods for each, with the “obvious implication” that “disgorgement is not equitable relief.” The SEC’s own data reinforce the point: In 2024, the Commission obtained $6.1 billion in disgorgement orders but returned only $345 million to victims. “It is difficult,” Justice Thomas wrote, “to see such a practice as anything other than a fines regime, an inherently legal process.”

Open questions

Sripetch resolved the financial-loss issue but left several others open. The most significant is whether SEC disgorgement is now a legal remedy that triggers the Seventh Amendment right to a jury trial. The majority assumed without deciding that disgorgement remains equitable. Justice Thomas’s concurrence argued otherwise and flagged an existing circuit split between the Fifth Circuit and the Second Circuit. If disgorgement is a legal remedy, then defendants are entitled to a jury trial—a shift that would fundamentally change the economics of SEC enforcement.

The Court also left unresolved whether the SEC may seek disgorgement when distributing funds to investors is infeasible, whether disgorgement requires a violation of investors’ “legally protected interests,” and whether Section 78u(d)(7) frees the SEC entirely from Liu’s equitable constraints. On the last point, the majority assumed that equitable limitations still apply but did not so hold. The SEC told the Court at argument that disgorgement under Section 78u(d)(7) should be available “whether that is regarded as legal or equitable.” Expect the Commission to test that boundary.

Key takeaways

Sripetch confirms that the SEC need not prove investors lost money to obtain disgorgement and so preserves one of the SEC’s most powerful monetary remedies. The Commission obtained $10.8 billion in disgorgement and prejudgment interest in fiscal year 2025 alone. Without a financial-loss prerequisite, the SEC can seek disgorgement tied to net profits even when quantifying investor losses is difficult or impossible, as in pump-and-dump schemes, unregistered offerings, and market manipulation cases.

But Liu’s net-profits limitation remains intact. Defendants should aggressively contest the SEC’s disgorgement calculations. The district court in Sripetch itself cut the SEC’s request nearly in half after finding the government’s figure overstated profits and failed to credit legitimate expenses.

Sripetch was grounded in the SEC’s statutory remedies, under Sections 78u(d)(5) and (7) of the Exchange Act, in proceedings and actions brought by the Commission under the securities law, and so the decision does not directly bear on securities-law claims by other plaintiffs, such as investors under Section 10(b)(5) or issuers or derivative plaintiffs under Section 16(b).

The most significant development from Sripetch may be Justice Thomas’s concurrence, which argues that Congress has converted SEC disgorgement into a legal remedy subject to the Seventh Amendment. A circuit split on that question already exists, so disgorgement is likely headed back to the Supreme Court.

Defendants should preserve jury-trial arguments in every proceeding where the SEC seeks disgorgement and should scrutinize the SEC’s disgorgement calculations to hold the Commission to Liu’s net-profits cap.