Facts of the Case
From at least 2013 to 2019, Ongkaruck Sripetch participated in a series of fraudulent securities schemes involving at least 20 microcap, or “penny,” stock companies. Working alongside various associates and through multiple entities, Sripetch acquired discounted shares of small-cap companies and then secretly funded promotional campaigns to inflate their stock prices before selling his own holdings into the artificially heightened market—a practice known as stock scalping. He also engaged in unregistered sales of securities, most notably through control of a company called Abby Inc., and manipulated trading in another company, VMS Rehab Systems, through matched trades and wash trades designed to create the illusion of market activity. Later, he organized pump-and-dump schemes for Argus Worldwide stock, using matched trading to build trading volume before dumping shares after promotions without disclosing his intent to sell.
In 2020, the U.S. Securities and Exchange Commission (SEC) filed a civil enforcement action against Sripetch and others. In 2023, Sripetch consented to a bifurcated judgment, agreeing to the SEC’s allegations for the purposes of remedies. The U.S. District Court for the Southern District of California found him liable for $2.25 million in disgorgement and over $1 million in interest. On appeal, the U.S. Court of Appeals for the Ninth Circuit affirmed that the SEC may obtain disgorgement under 15 U.S.C. §§ 78u(d)(5) and (d)(7) without showing that investors suffered pecuniary harm, joining a circuit split on this question.
Questions
May the SEC seek equitable disgorgement under 15 U.S.C. §§ 78u(d)(5) and (d)(7) without showing investors suffered pecuniary harm?
Conclusions
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The SEC does not need to prove that investors suffered a financial loss before a court may order a securities fraud defendant to disgorge—that is, hand over—ill-gotten profits to wronged investors. Justice Neil Gorsuch authored the 9-0 majority opinion.
Two statutory provisions govern the analysis: 15 U.S.C. §78u(d)(5), which authorizes the SEC to seek "any equitable relief" for investors, and §78u(d)(7), added by Congress after Liu v. SEC (2020), which expressly authorizes disgorgement. The Court assumed without deciding that §78u(d)(7) disgorgement remains subject to traditional equitable principles—including Liu's requirement that awards go to victims—and still concluded that no proof of financial loss is required. The Court drew a key distinction between damages, a legal remedy measured by the plaintiff's loss, and disgorgement, an equitable remedy measured by the defendant's gain. Equity's goal in ordering disgorgement is not to compensate a victim for what they lost but to strip the wrongdoer of what they unjustly gained by invading the victim's legally protected interests.
Traditional equitable principles confirm this conclusion. A person whose legally protected interests a defendant has violated may obtain restitution of the defendant's wrongful gains even when that person suffered "no measurable loss whatsoever." Numerous historical cases illustrate the point: courts ordered defendants to surrender profits from unauthorized use of another's property even where the property owner admitted to suffering no financial harm. Liu's requirement that disgorgement be "awarded for victims" draws directly from these same equitable principles, and those principles define a "victim" as someone whose legally protected interests were invaded—not as someone who lost money. When a wrongdoer enriches himself without leaving the victim financially worse off, equity faces a choice between two versions of the status quo: strip the wrongdoer of the unjust gain, or let the wrongdoer keep it. Equity traditionally demands the first.
Justice Clarence Thomas concurred, agreeing with the result but arguing that Congress's decision to enumerate disgorgement as a separate statutory remedy in §78u(d)(7)—with its own distinct limitations period, set apart from the general equitable-relief provision—transformed disgorgement into a legal remedy, meaning the Seventh Amendment's right to a jury trial should apply in a future case presenting that question.
