The case centers on Ongkaruck Sripetch, who pleaded guilty to selling unregistered securities and was sentenced to 21 months' imprisonment. In a separate civil enforcement action, the SEC sought to force him to disgorge more than $6 million in profits from those transactions.
The court of appeals affirmed the disgorgement award but declined to consider whether the SEC could prove that Sripetch's activity caused "pecuniary harm" to his customers—something other courts of appeals have required when imposing such a remedy.
Sripetch argues that this case follows the three similar cases the court has decided in the last 10 years reining in the SEC's broad use of equitable remedies, pointing to 2020's Liu v. SEC, which rejected the SEC's use of disgorgement because it extended beyond the profits that Liu earned from the illegal activity in that case. He contends that Liu's repeated statements that the point of disgorgement is to pay "fair compensation to the person wronged" necessarily requires a victim that has suffered pecuniary harm.
The government counters that "disgorgement" has a long history as a type of restitution that forces the wrongdoer to turn over its "ill-gotten gains." The SEC argues that so long as it proves the defendant profited from illegal activities and limits recovery to those profits, the remedy falls within the traditional conception of disgorgement.
An amicus brief from several "remedies and restitution scholars" supports the government's position, including law professor Douglas Laycock, who is widely regarded as the country's leading remedies scholar. That brief argues that disgorgement, as traditionally understood, focuses entirely on the profit of the wrongdoer as opposed to the harm of the victim.
However, Justices Clarence Thomas and Neil Gorsuch have been deeply skeptical of casual enforcement of equitable remedies in various contexts and may be predisposed to suspicion of the SEC's continued routine use of disgorgement after the decision in Liu.