Control Is Not Receipt: Why the SEC's Disgorgement Judgment Against Me Should Not Stand

There is a basic misconception about my SEC case. The issue is no longer simply whether the SEC obtained a liability verdict. The issue is whether that verdict legally supports the massive monetary judgment the SEC later obtained.

It does not.

After trial, the district court entered a final judgment requiring me to pay more than $19 million, including $13,129,809 in disgorgement imposed jointly and severally with SureTrader, $3,386,995.48 in prejudgment interest on that amount, additional individual disgorgement, interest, and a civil penalty. The judgment treats SureTrader's corporate profits as if they were automatically my personal unjust enrichment. That is the core problem.

This was not a customer-fraud case. The SEC did not prove that SureTrader stole customer money, misappropriated assets, manipulated customer trades, churned accounts, or lied to customers about securities. SureTrader was a self-directed day-trading broker based in the Bahamas. Customers made their own trading decisions. They paid disclosed commissions for brokerage execution services. The SEC's theory was that SureTrader solicited U.S. customers while failing to register with the SEC as a broker-dealer.

That distinction matters.

The Supreme Court's recent decision in Sripetch v. SEC is being misunderstood. The SEC will no doubt argue that Sripetch helps it because the Court held that the SEC does not have to prove investors suffered financial losses before obtaining disgorgement. That part is true. A defendant cannot defeat disgorgement merely by saying investors did not lose money.

But Sripetch did not give the SEC a blank check.

The Supreme Court reaffirmed several limits on disgorgement. Disgorgement is supposed to be limited to net profits, not gross revenue. It must be tied to profits caused by unlawful conduct. It is supposed to be for wronged investors, not a disguised penalty for the Treasury. And most importantly, the Court described disgorgement as a remedy for profits obtained through an invasion of a victim's legally protected interests.

That last point is critical.

Sripetch involved fraudulent penny-stock schemes and pump-and-dump conduct. In that case, the defendant did not dispute that the investors' legally protected interests had been violated. Because of that, the Supreme Court expressly declined to decide whether the SEC may obtain disgorgement for securities-law violations that do not invade investors' legally protected interests.

My case presents exactly that unresolved issue.

The SEC's case against SureTrader was based on registration and solicitation. But the customers were self-directed day traders. They voluntarily opened accounts, placed their own trades, paid disclosed commissions, and received the execution services they paid for.

So the question after Sripetch is not simply: Did the SEC prove a registration violation?

The real question is: Did the SEC prove that SureTrader invaded the legally protected interests of its customers in a way that made ordinary brokerage commissions unjust enrichment?

That finding was never made.

The district court treated the registration violation as if it automatically converted SureTrader's U.S.-customer profits into disgorgement. The court relied on Eleventh Circuit cases like Almagarby and Keener to conclude that profits from prohibited unregistered transactions were causally linked to the failure to register.

But Sripetch requires a more careful analysis. The Supreme Court did not say that every securities-law violation automatically creates a victim entitled to restitution. It said disgorgement is based on profits gained through interference with protected interests. In a self-directed brokerage case, that cannot simply be assumed.

If the SEC wants disgorgement, it should have to identify the protected interest, identify the customers whose interests were invaded, and prove which profits came from that invasion. It should not be allowed to say "registration violation" and then take all U.S.-customer-related profits as if the conclusion automatically follows.

The most dangerous part of the judgment is the joint-and-several disgorgement award.

The jury found me liable as a control person under Section 20(a). The district court then used that finding to impose SureTrader's corporate disgorgement on me personally.

That is wrong.

Control-person liability may establish liability for a violation. But disgorgement is different. Disgorgement is not ordinary damages. It is a gain-based remedy. It is supposed to strip a wrongdoer of unjust enrichment that the person actually received as a result of the violation.

Sripetch discusses the statutory language allowing disgorgement of unjust enrichment received by "the person" who received it as a result of the securities-law violation.

That language matters.

The SEC proved, at most, that SureTrader earned corporate brokerage profits. It did not prove that I personally received SureTrader's $13.1 million in net profits. The jury did not find that those profits were transferred to me. It did not find that corporate funds were commingled with my personal assets. It did not find that apportionment was impossible. It did not find that SureTrader and I were partners sharing the same pot of money.

Control is not receipt. Control is not commingling. Control is not personal enrichment. Control is not proof that corporate profits belong to the individual.

Yet the judgment treats those things as the same.

The jury instructions make this problem even clearer. The jury was told that if it found liability, the judge alone would determine remedies later.

That means the jury never decided the factual issues that matter for disgorgement.

The jury was not asked which U.S. customers were actually solicited, which were unsolicited, which commissions came from solicited customers, whether all U.S.-customer profits were caused by unlawful solicitation, whether self-directed customers were "victims" under disgorgement law, whether their legally protected interests were invaded, what net profits were attributable to the alleged violation, whether I personally received those profits, whether joint-and-several disgorgement was equitable, or whether SureTrader's profits could be apportioned.

The verdict form asked broad liability questions. It did not decide the remedy facts needed to support a $19 million personal money judgment.

That is especially important after Sripetch. If disgorgement requires victim status, protected-interest invasion, causation, net profits, receipt, and apportionment, then those facts cannot simply be presumed after trial.

The SEC's disgorgement formula also has a serious flaw. The SEC calculated the percentage of SureTrader's commissions attributable to U.S. customers and applied that percentage to SureTrader's net income. The district court accepted that approach.

But that formula assumes that every U.S. customer was unlawfully solicited and that every dollar of U.S.-customer profit was tainted.

That is not what the jury found.

Rule 15a-6 turns on solicitation. A foreign broker-dealer may effect transactions with persons who have not been solicited. The question should be customer-specific and transaction-specific. The SEC should have had to separate solicited from unsolicited accounts, lawful from unlawful transactions, and SureTrader's corporate profits from my alleged personal gains.

Instead, the SEC used a broad percentage formula that treated "U.S. customer" as the same thing as "unlawfully solicited customer." That leap matters, especially when the result is a multimillion-dollar personal judgment.

The Supreme Court warned in Sripetch that if the SEC uses disgorgement as a penalty or as a Treasury collection device, that raises serious legal questions.

That is exactly the concern here.

The final judgment says the SEC may propose a plan to distribute funds through a Fair Fund, but it does not require an actual distribution to identified victims.

If the SEC cannot identify the customers who were actually wronged, cannot explain what protected interest was invaded, and cannot show how the money will be returned to them, then the disgorgement starts looking less like restitution and more like punishment.

Punishment has rules. Penalties are different from equitable disgorgement. The SEC cannot avoid those constitutional and statutory limits by calling a penalty "disgorgement."

There is also a deeper constitutional issue.

Justice Thomas's concurrence in Sripetch explains that SEC disgorgement under the current statute increasingly looks like a legal remedy, not an equitable one. If disgorgement is legal relief, then the Seventh Amendment requires a jury trial.

That issue is not yet settled by the Supreme Court majority. But my case shows why it matters.

A judge imposed a massive personal money judgment after the jury was told it would not decide remedies. The jury never found the amount of disgorgement. It never found personal receipt. It never found apportionment. It never found which profits were caused by unlawful conduct. It never found that customers suffered an invasion of legally protected interests.

If the SEC wants a personal money judgment of this size, the Constitution should require more.

The appeal is not about whether the SEC can ever obtain disgorgement in a registration case. The issue is whether the SEC can take a generalized liability verdict and turn it into automatic personal disgorgement of corporate profits.

It should not be able to.

The correct rule should be simple: if the SEC seeks disgorgement, it must prove net profits caused by the violation, tied to wronged investors whose legally protected interests were invaded, and received by the person ordered to pay.

That did not happen here.

The district court's judgment should be vacated because it transformed Section 20(a) control-person liability into automatic personal disgorgement of SureTrader's corporate profits. That is not disgorgement. That is punishment.

And after Sripetch, the difference matters.

This article reflects my personal opinion only and should not be relied upon as legal, financial, investment, or tax advice. I am not a lawyer and I am not your lawyer. Nothing here creates an attorney-client relationship.

Statements about cases, agencies, courts, and individuals are based on publicly reported materials, court filings, and archived government records. Anyone facing a regulatory or criminal matter should consult experienced counsel about their specific situation.