March 3, 2020 / 5:40 PM / a month ago

U.S. Supreme Court leans toward SEC's power to recover ill-gotten gains

WASHINGTON, March 3 (Reuters) - U.S. Supreme Court justices on Tuesday appeared inclined to back the Securities and Exchange Commission’s power to use federal courts to force defendants to surrender profits obtained through fraud as part of its enforcement of investor protection laws.

The nine justices heard an appeal by California couple Charles Liu and Xin Wang contesting a 2016 civil action brought against them by the SEC in federal court. They were ordered to disgorge almost $27 million, the same amount they raised from foreign investors to build a never-completed cancer treatment center.

Conservative and liberal justices were skeptical of the challengers’ bid to completely strip the SEC of its disgorgement power in federal courts, although some suggested that limits should be imposed.

Disgorgement, part of the SEC’s civil enforcement arsenal, is aimed at passing on funds acquired in a fraudulent scheme to the original investors.

Reporting by Andrew Chung; Additional reporting by Lawrence Hurley; Editing by Will Dunham

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