Sripetch v. SEC, Docket No. 25-466

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In a unanimous decision that could reshape how the government punishes securities fraud, the Supreme Court ruled that regulators can force wrongdoers to surrender their ill-gotten gains without proving that investors actually lost money. The ruling sounds technical, but it has real consequences. It gives the SEC a powerful tool to strip fraudsters of their profits, even in cases where victims escaped financial harm.

The Case: A Stock Scheme Gone Wrong

Ongkaruck Sripetch ran what's known as a pump-and-dump scheme. It starts with a fraudster artificially inflates a stock's price, sells their shares at the peak, and disappears. Other investors are left holding worthless stock. Sripetch did this with at least twenty low-priced stocks and made $4.1 million in the process.

When a court ordered him to give back that money, Sripetch fought back. He argued the SEC should have to prove that actual investors lost money before taking his profits. The Supreme Court disagreed.

What the Court Decided

Justice Neil Gorsuch, writing for all nine justices, explained the difference between two types of court orders. Damages are based on what the victim lost. Disgorgement, by contrast, is based on what the wrongdoer gained. The Court pointed to centuries of legal history showing that courts have stripped defendants of their profits even when nobody else suffered financial harm. Examples ranged from stolen coal mining rights to borrowed machinery to stolen crops.

The Court upheld the $4.1 million order against Sripetch. A person whose legal rights were violated can recover the wrongdoer's profits even if that person suffered no financial loss at all.

What the Court Left Unanswered

Here's where things get complicated. The Court deliberately avoided answering three major questions that will likely return to the Supreme Court soon.

First, Congress passed a law after an earlier Supreme Court decision that explicitly authorized disgorgement. Does that law free the SEC from older restrictions? Second, what happens when the SEC cannot identify the victims to pay them back? Can the government keep the money? Third, and most important, Justice Thomas raised a question in a separate opinion: Is disgorgement now a legal remedy that gives defendants the right to a jury trial?

That last question could be transformative. Thomas noted that in 2024 alone, the SEC collected $6.1 billion in disgorgement orders but returned only $345 million to actual victims. If disgorgement requires a jury trial, it would fundamentally change how the SEC prosecutes fraud cases. Lower courts are already split on this issue, so the Supreme Court will likely have to settle it soon.

A Clear Path to Punish Securities Fraud

The bottom line is the government now has a clearer path to punish securities fraud by taking away wrongdoers' profits. You don't need to be a victim who lost money to see that happen. That's good news if you believe fraudsters should not benefit from their crimes. But the decision also leaves open the possibility that the SEC could use this tool in ways that go beyond compensating victims, which is why Justice Thomas and others are watching closely for the next chapter of this legal saga.