Supreme Court Finds S.E.C. Can Strip Wrongdoers of Illegal Financial Gains, Even Without Proof of Victim Loss

The Supreme Court ruled on Thursday that the federal Securities and Exchange Commission can recover money that companies and individuals gained illegally, even if the agency is unable to prove that investors suffered a financial loss.In a unanimous decision written by Justice Neil M.Gorsuch, the justices sided with the independent administrative agency tasked with regulating securities markets, rejecting arguments by a man who had been accused in a penny-stock scheme.

In the ruling, Justice Gorsuch explained that “a showing of pecuniary loss is not required before an investor may qualify as a victim of an offender’s wrongdoing entitled to compensation.”At a time when the Trump administration has often appeared skeptical of regulation and penalizing some white-collar wrongdoing, the decision bolsters the powers of the Wall Street watchdog agency, which has recovered billions of dollars under a process known as “disgorgement.” The administration had defended the agency’s power to recover the funds.The case involved Ongkaruck Sripetch, a Los Angeles man whom federal prosecutors accused of engaging in pump-and-dump schemes, where Mr.Sripetch obtained shares of penny-stock companies, promoted the companies and then sold the shares when the share price rose.In 2022, Mr.

Sripetch was sentenced to more than a year in prison for participating in illegal securities fraud schemes.The S.E.C.separately brought a civil enforcement action against Mr.

Sripetch, charging him with six counts of securities fraud and one count of selling unregistered securities.Mr.Sripetch consented to the judgment against him, but he contested the agency’s attempt to recover the $4.1 million he had gained from the scheme, arguing that the S.E.C.

was required to show that he had caused investors to suffer financial losses.Barring that, he asserted, the agency could not require him to pay.In response, the S.E.C.

argued first at a federal trial court that the evidence in the case showe...