The Supreme Court seems prepared to preserve a tool that the SEC used last year to recoup $3.2 billion in ill-gotten gains in fraud cases.
The Supreme Court seemed prepared Tuesday to preserve a tool that federal securities regulators used last year to recoup $3.2 billion in ill-gotten gains in fraud cases.
At most, the justices might impose some limits on how the Securities and Exchange Commission seeks repayment, or disgorgement, of profits from people who have been found to violate securities law. But no one on the court appeared ready to say the SEC lacks the power to ask a federal court to order repayment of money obtained through fraud.
Liu and Wang are relying on a unanimous Supreme Court decision in 2017 that already limited the SEC’s ability to go after profits when alleged fraud has been going on for years before authorities file charges. The 2017 case left open whether courts have the authority to order disgorgement of profits. The SEC meanwhile has continued to aggressively pursue defendants’ profits in fraud cases. A year ago, for instance, the SEC persuaded a federal judge in Florida to order defendants in an alleged Ponzi scheme to repay $892 million in profits.
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