Supreme Court Preserves SEC Disgorgement Without Proof of Investor Loss

The Supreme Court has confirmed that the SEC may obtain disgorgement without proving that investors suffered pecuniary loss. In Sripetch v. SEC, No. 25-466, 608 U.S. Sup. (2026), the Court unanimously held that an investor may qualify as a “victim” for disgorgement purposes even where the SEC cannot prove measurable financial harm.

The decision resolves an important post-Liu circuit split and preserves disgorgement as one of the SEC’s central enforcement remedies. At the same time, the opinion leaves unresolved several questions that may define the next phase of securities enforcement litigation, including whether statutory disgorgement under 15 U.S.C. § 78u(d)(7) remains equitable, whether disgorged funds must be returned to identifiable investors, and whether the Seventh Amendment requires jury trials when the SEC seeks disgorgement.

Executive Summary

In Sripetch, the Court held that the SEC need not prove investor pecuniary loss to obtain disgorgement. The ruling rejects the Second Circuit’s approach in SEC v. Govil, 86 F.4th 89 (2d Cir. 2023), and aligns more closely with the First and Ninth Circuits’ decisions in SEC v. Navellier & Associates, Inc., 108 F.4th 19 (1st Cir. 2024), and SEC v. Sripetch, 154 F.4th 980 (9th Cir. 2025).

The Court reasoned that damages and disgorgement perform different remedial functions. Damages are measured by the plaintiff’s loss. Disgorgement is measured by the defendant’s gain. Under traditional equitable principles, a wrongdoer may be stripped of unjust profits obtained through interference with another’s legally protected interests, even where the injured party cannot show a corresponding financial loss.

That holding materially strengthens the SEC’s litigation position in fraud, manipulation, registration, disclosure, and digital asset cases where investor loss may be difficult to prove. But the decision does not give the SEC unrestricted authority. The Court assumed without deciding that disgorgement remains subject to traditional equitable limitations, including the requirement recognized in Liu v. SEC, 591 U.S. 71 (2020), that disgorgement be “awarded for victims.”

Justice Thomas’s concurrence identifies the next major issue. In his view, Congress transformed SEC disgorgement into a legal remedy when it enacted § 78u(d)(7). If that view gains traction, defendants may have a constitutional right to a jury trial when the SEC seeks disgorgement, particularly after SEC v. Jarkesy, 603 U.S. 109 (2024).

The Legal Question Before the Court

Does the SEC need to prove that investors suffered pecuniary loss before a court may order disgorgement?

The case arose from alleged penny-stock schemes involving at least 20 companies. The SEC charged Ongkaruck Sripetch with six counts of securities fraud and one count of selling unregistered securities. Sripetch consented to judgment and agreed that the district court could order disgorgement. When the SEC sought more than $4.1 million, he objected.

His argument rested on Liu. Because Liu held that disgorgement must be “awarded for victims,” Sripetch argued that the SEC had to prove the existence of victims who suffered actual financial harm. Without proof of pecuniary loss, he contended, there were no victims to receive disgorgement.

The Ninth Circuit rejected that argument, holding that “a finding of pecuniary harm is not required” before disgorgement may be ordered. SEC v. Sripetch, 154 F.4th 980, 985 (9th Cir. 2025). That holding deepened an existing split. The First Circuit had reached a similar conclusion in Navellier. The Second Circuit had gone the other way in Govil, holding that disgorgement required proof that investors suffered pecuniary harm.

The Supreme Court granted certiorari to resolve that disagreement.

The Court’s Holding

Justice Gorsuch, writing for a unanimous Court, held that “a showing of pecuniary loss to investors is not required before the SEC may obtain a disgorgement award.” Sripetch, 608 U.S. Sup., slip op. at 1.

The Court reached that conclusion by returning to the remedial distinction between damages and disgorgement. Damages are plaintiff-focused. Disgorgement is defendant-focused. The former compensates loss. The latter removes gain.

The Court explained that, under traditional equitable principles, a claimant seeking a gain-based remedy does not need to prove that he suffered a corresponding loss. Quoting the Restatement, the Court stated that a victim may obtain restitution of a defendant’s wrongful gain even where the victim suffered “no measurable loss whatsoever.” Id. at 9.

That proposition mattered because Liu grounded SEC disgorgement in traditional equity. The Court rejected the argument that Liu silently imposed a pecuniary-loss requirement. Liu required disgorgement to be awarded for victims, but it did not define victims as only those who suffered financial loss.

The Court’s central point was direct: “The point of the remedy is for ‘the defendant . . . to give to the plaintiff the amount by which he has been enriched’ from the wrongful invasion of the plaintiff’s legally protected interests, not to compensate the plaintiff for a financial loss.” Id. at 9, quoting Restatement (First) of Restitution § 1 cmt. e (1936).

Why the Court Rejected a Pecuniary-Loss Requirement

The Court’s analysis rested on three propositions.

First, disgorgement is measured by wrongful gain. The SEC need not prove a dollar-for-dollar investor loss because the remedy does not exist to measure the investor’s loss. It exists to strip the wrongdoer of unlawful enrichment.

Second, a person may be a victim even without measurable economic harm. The Court emphasized that traditional equity recognized claims where a defendant invaded a legally protected interest and earned profits from that invasion, even though the plaintiff was not financially worse off.

Third, adopting a pecuniary-loss requirement would conflict with the historical function of gain-based remedies. The Court relied on property and restitution cases involving unauthorized uses of another’s rights or assets. Those cases showed that equity may force a wrongdoer to surrender profits obtained from misuse of another’s legally protected interest without requiring proof that the rightsholder suffered a measurable loss.

The Court summarized the rule in practical terms: “Whatever else traditional equitable principles demand, they do not require a showing of pecuniary loss before a court may issue an award of unjust profits.” Sripetch, slip op. at 11.

What the Court Did Not Decide

The Court carefully limited its decision.

The most important unresolved question concerns the relationship between § 78u(d)(5) and § 78u(d)(7). Section 78u(d)(5) authorizes “equitable relief” appropriate or necessary for the benefit of investors. Liu held that disgorgement under that provision must comply with traditional equitable principles. After Liu, Congress enacted § 78u(d)(7), which expressly authorizes the SEC to seek disgorgement.

The SEC argued that § 78u(d)(7) changed the analysis. In the Commission’s view, statutory disgorgement under § 78u(d)(7) is not subject to every equitable limitation recognized in Liu, including the requirement that disgorgement be awarded for victims.

The Court declined to decide that question. Instead, it assumed without deciding that disgorgement under § 78u(d)(7) remains an equitable remedy subject to traditional equitable limitations. Even under that assumption, the Court held, the SEC need not prove investor pecuniary loss.

That is a holding with broad practical effect. The Court also declined to decide whether disgorgement may be ordered where distribution to investors is infeasible. Liu left that issue open. Sripetch leaves it open as well.

The Decision’s Immediate Effect on SEC Enforcement

The SEC’s immediate victory is significant. The Commission can now pursue disgorgement without proving that investors suffered out-of-pocket losses, at least where the SEC can establish unlawful gains tied to a violation that invaded investors’ legally protected interests.

This will matter in several categories of cases.

In market manipulation cases, investor harm may be difficult to calculate because trading patterns, market movements, and causation issues can complicate loss analysis. After Sripetch, the SEC can focus on the defendant’s unlawful gains rather than proving investor losses.

In disclosure and misrepresentation cases, defendants often argue that investors did not lose money or that any loss was caused by broader market forces. Sripetch reduces the force of that argument as a defense to disgorgement.

In unregistered offering cases, particularly digital asset matters, the SEC frequently seeks disgorgement of proceeds from allegedly unlawful sales. Defendants may still challenge causation, net profits, legitimate expenses, and distribution mechanics. They can no longer defeat disgorgement solely by arguing that purchasers did not suffer pecuniary harm.

In insider trading cases, disgorgement traditionally tracks profits gained or losses avoided. Sripetch reinforces the principle that disgorgement looks to wrongful gain, not necessarily investor loss.

The Limits That Still Matter

The decision does not eliminate meaningful defenses to disgorgement.

First, the SEC must still establish a causal connection between the violation and the alleged unjust enrichment. Section 78u(d)(3)(A)(ii) refers to “any unjust enrichment” received “as a result of” the securities-law violation. That statutory causation requirement remains important.

Second, disgorgement remains limited to net profits, not gross receipts. Liu held that equitable disgorgement must generally be limited to net profits after deducting legitimate expenses. Liu, 591 U.S. at 91-92. Sripetch does not disturb that limitation.

Third, the “legally protected interests” requirement may become more important. The Court emphasized that this case did not present the question whether the SEC may obtain disgorgement for securities-law violations that do not invade the legally protected interests of investors. That issue remains available in future cases.

Fourth, distribution remains unsettled. Liu required disgorgement to be awarded for victims, but left open whether funds may be sent to the Treasury when distribution is infeasible. Sripetch does not answer that question.

Fifth, Seventh Amendment challenges remain live. Justice Thomas’s concurrence makes clear that at least one Justice views statutory disgorgement as a legal remedy that should trigger jury-trial rights.

Justice Thomas’s Concurrence and the Next Constitutional Challenge

Justice Thomas agreed with the Court’s holding but wrote separately to identify what he views as the next unresolved issue: whether SEC disgorgement is now a legal remedy.

His concurrence is likely to become central in future defense briefing.

Justice Thomas reasoned that Congress altered the legal character of disgorgement when it enacted § 78u(d)(7). Before that amendment, the SEC relied on § 78u(d)(5), which authorized equitable relief. After the amendment, disgorgement appears in its own statutory subsection and is governed by limitations periods distinct from those applicable to equitable remedies.

In Justice Thomas’s view, that structure matters. He wrote: “In a future case, we should recognize that disgorgement is now a legal remedy for which the Seventh Amendment requires a jury trial.” Sripetch, Thomas, J., concurring, slip op. at 1.

That statement is especially important after Jarkesy. In Jarkesy, the Court held that when the SEC seeks civil penalties for securities fraud, the Seventh Amendment entitles the defendant to a jury trial. SEC v. Jarkesy, 603 U.S. 109, 123-25 (2024).

Justice Thomas’s concurrence suggests that disgorgement may face a similar constitutional challenge if it functions as a money judgment imposed by the government rather than a traditional equitable remedy returning specific funds to victims.

He also emphasized the practical reality of SEC disgorgement. Citing 2024 figures presented by amici, he noted that the SEC obtained orders to disgorge $6.1 billion while returning only $345 million to victims. Sripetch, Thomas, J., concurring, slip op. at 8. In his view, that practice makes disgorgement look like a fines regime rather than equitable restitution.

His conclusion was unequivocal: “In my view, disgorgement is a legal remedy.” Id. at 10.

Strategic Considerations for Defendants

After Sripetch, defendants should recalibrate disgorgement strategy.

Arguments based solely on the absence of investor pecuniary loss are unlikely to succeed. The better defense approach will focus on statutory causation, net profits, legitimate expenses, remoteness, tracing problems, distribution feasibility, and whether the alleged violation actually invaded investors’ legally protected interests.

Defendants should also preserve Seventh Amendment objections where the SEC seeks substantial disgorgement under § 78u(d)(7). Justice Thomas’s concurrence provides a roadmap for arguing that statutory disgorgement is legal rather than equitable, particularly where the SEC seeks a money judgment payable to the government or cannot identify victims who will receive funds.

Settlement strategy may also change. The SEC will likely view Sripetch as strengthening its leverage in cases where investor loss is uncertain. Defendants should expect the Commission to rely heavily on the decision in settlement negotiations, particularly in matters involving alleged offering fraud, market manipulation, and digital asset distributions.

At the same time, defendants should resist efforts to treat Sripetch as a broad endorsement of all SEC disgorgement practices. The Court answered one question. It did not resolve the full post-Liu remedial framework.

Strategic Considerations for Regulated Entities

For issuers, investment advisers, broker-dealers, digital asset businesses, and public companies, the practical lesson is clear. The absence of provable investor loss will not necessarily eliminate monetary exposure in an SEC enforcement action.

Internal investigations and Wells submissions should therefore address unjust enrichment directly. That includes developing a defensible calculation of net profits, identifying legitimate business expenses, evaluating causation, and assessing whether alleged proceeds are properly attributable to the charged misconduct.

For digital asset issuers and platforms, Sripetch is particularly important. In many crypto enforcement matters, purchasers may have sold at gains, held tokens, received distributions, or experienced losses driven by market volatility rather than the alleged violation itself. After Sripetch, the SEC may argue that those factual complexities do not preclude disgorgement if the issuer or promoter received unlawful proceeds.

That does not mean disgorgement is automatic. It means the center of gravity shifts from investor loss to defendant gain.

Frequently Asked Questions

Does the SEC have to prove investor losses to obtain disgorgement?

No. After Sripetch v. SEC, the SEC does not need to prove that investors suffered pecuniary loss before obtaining disgorgement.

What must the SEC prove to obtain disgorgement?

The SEC must still establish that the defendant received unjust enrichment as a result of the securities-law violation. Disgorgement remains limited to net profits causally connected to the unlawful conduct.

Did the Supreme Court overrule Liu v. SEC?

No. The Court applied Liu but clarified that Liu did not impose a pecuniary-loss requirement. Liu’s limitations on net profits and victim-focused relief remain important.

What happened to the Second Circuit’s rule in Govil?

The Supreme Court rejected the pecuniary-harm requirement associated with Govil. The SEC may seek disgorgement even without proving that investors suffered financial loss.

Does disgorgement require a jury trial after Jarkesy?

The Supreme Court did not decide that issue. Justice Thomas’s concurrence argues that disgorgement under § 78u(d)(7) is a legal remedy requiring a jury trial. That issue is likely to be litigated in future cases.

Conclusion

Sripetch is a substantial victory for the SEC. The Court preserved disgorgement in cases where the Commission can prove unlawful gains but cannot prove investor pecuniary loss.

The decision also confirms that the Court’s SEC-remedies jurisprudence remains unsettled. Kokesh treated disgorgement as a penalty for limitations purposes. Liu preserved disgorgement as equitable relief when constrained by traditional equity. Jarkesy constitutionalized jury-trial protections for SEC penalties. Sripetch now confirms that investor financial loss is not required.

The next question is whether statutory disgorgement under § 78u(d)(7) can continue to avoid the Seventh Amendment. Justice Thomas has already supplied the argument. Future defendants will almost certainly use it.