‘Existential Threat’
But even with the limits, some agency veterans said they see the decision as a victory for the SEC because it formally preserves the enforcement program’s ability to obtain disgorgement. Banning the remedy would have been a major setback for its policing efforts.

“That was the existential threat” that the commission feared, said Stephen Crimmins, a former agency enforcement attorney who is now a partner at Murphy & McGonigle. “This is a big win for the SEC.”

The ruling didn’t directly affect the SEC’s separate authority to seek disgorgement through administrative proceedings.

The couple, Charles Liu and Xin Wang, had asked the justices to go further and bar the SEC from seeking court-ordered disgorgement at all. Liu and Wang said that tool isn’t one of the remedies Congress has authorized the SEC to seek against people who violate the nation’s securities fraud laws.

Sotomayor rejected that contention, saying Congress incorporated the traditional courtroom rule that judges may “strip wrongdoers of their ill-gotten gains.”

Justice Clarence Thomas was the court’s only member who said he would have barred the SEC from seeking disgorgement at all in federal court.

Returning Funds
President Donald Trump’s administration and the SEC defended the disgorgement power, saying Congress authorized it three times, including in the Sarbanes-Oxley Act.

SEC spokeswoman Chandler Costello said the decision “allows us to continue to strip wrongdoers of their ill-gotten gains and return money to its rightful owners, following the court’s direction to ensure that our efforts embody principles of equity and fairness.”

The SEC says it tries to return disgorged funds to injured investors when possible. The agency says it collected $1.5 billion in disgorgements and penalties in 2019 and paid out $1.2 billion to investors that year.

Liu and Wang were found to have defrauded people seeking to take advantage of a visa program for foreigners who make large U.S. investments. The SEC said Liu and Wang falsely told investors their money would be used for a cancer treatment center.