Victims of securities fraud in New York might want to know about a recent Supreme Court decision that preserved disgorgement as an equitable remedy for securities fraud while also providing contours for its applications. Disgorgement might allow the victims of securities fraud to be made financially whole but is not intended as a punitive measure.
Disgorgement is a remedy through which the perpetrators of securities fraud may be ordered to give up their illegally gotten proceeds from their securities fraud schemes. The case that was decided by the U.S. Supreme Court involved securities fraud under the EB-5 investor treaty visa program. Under this program, foreign nationals who invest substantial sums in U.S. business activities can secure immigrant visas.
One couple solicited foreign investments for a cancer center from would-be EB-5 investors. Instead of using most of the money for the center, they reportedly spent $20 million on salaries and marketing expenses and diverted a substantial sum to personal accounts.
The Supreme Court ruled that a disgorgement order is a valid form of equitable relief when it does not exceed the net profits earned by the wrongdoers. Through its ruling, the Supreme Court recognized disgorgement as a valid equitable remedy but placed limits on the amount of money that could be disgorged.