Docket 25-466
Sripetch v. SEC
DecidedJun 4, 2026
9-0unanimous decision
Source: CourtListener.
SEC can seek disgorgement of fraud profits without proving investors lost money
What it does
The Court held that the SEC does not need to show that investors suffered a pecuniary (money) loss in order to obtain a disgorgement award — a court order requiring a wrongdoer to give up profits made through illegal conduct. The ruling affirmed that under traditional principles of equity (the body of law focused on fairness and preventing unjust enrichment), the relevant question is whether the defendant wrongfully invaded the legally protected interests of investors, not whether those investors ended up with less money. This resolves a split among federal appeals courts, with the First and Ninth Circuits now confirmed correct and the Second Circuit's stricter rule rejected.
Who benefits
The SEC, which can now pursue disgorgement of fraud profits in a broader range of cases without having to document specific dollar losses to investors. Investors whose legally protected interests were violated by securities fraud, even when the fraud did not directly reduce their account balances.
Who is affected
People and entities charged with securities-law violations who profited from those violations — they can be ordered to give up those profits even if the government cannot show that any specific investor lost money as a direct result.
Practical impact
The SEC can now seek disgorgement in securities-fraud cases even when it cannot produce evidence that investors suffered direct financial losses — for example, in "pump and dump" schemes where some investors may have sold at a profit before prices collapsed. Defendants in SEC enforcement actions can no longer defeat a disgorgement claim simply by arguing that no investor can be shown to have lost money. The ruling leaves open separate questions about whether disgorgement funds must always be returned to investors and what happens when doing so is not feasible.
Majority reasoning
The majority held that traditional equity principles — the historical rules courts use when ordering wrongdoers to give up unjust profits — have never required proof that the victim suffered a financial loss. The Court reasoned that disgorgement is fundamentally different from damages: damages are measured by what the victim lost, while disgorgement is measured by what the wrongdoer gained, and the two are not the same thing. The majority pointed to a long line of historical cases — involving trespassing coal companies, misused farm leases, and unauthorized cave tours — where courts ordered defendants to hand over profits even though the plaintiffs admitted suffering no financial harm, because the defendants had wrongfully used something that belonged to the plaintiff. The Court rejected the argument that the prior ruling in Liu v. SEC required proof of pecuniary loss, explaining that Liu's requirement that disgorgement be "awarded for victims" was drawn from equity principles that define "victim" as someone whose legally protected interests were invaded — not someone who necessarily lost money. The majority also acknowledged concerns that the SEC might use disgorgement as a penalty rather than a remedy for victims, but said that worry does not justify adding a pecuniary-loss requirement that has no basis in equity law or in Liu.
Constitutional question
Must the Securities and Exchange Commission prove that investors suffered a measurable financial loss before a court can order a securities-law violator to give up the profits from that violation?
Precedent changed
Extends Liu v. SEC, 591 U.S. 71 (2020), clarifying that Liu's "awarded for victims" requirement does not mean victims must show pecuniary loss; also resolves the circuit split created by SEC v. Govil, 86 F.4th 89 (2d Cir. 2023), effectively rejecting that court's stricter rule.