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Supreme Court rules SEC may seize profits from fraudulent companies

The Supreme Court on Monday upheld the Securities and Exchange Commission (SEC) practice of seeking to seize profits obtained illegally from fraudulent companies.

In a 8-1 decision, the justices ruled that the SEC can force defendants in court to hand over their net profits obtained from wrongdoing as restitution to any victims who were defrauded.

Still, the decision, authored by Justice Sonia SotomayorSonia SotomayorWill the Supreme Court take ObamaCare off life-support? Supreme Court grapples over Catholic organization's fight against nondiscrimination law Girl Scouts spark backlash from left after congratulating Justice Amy Coney Barrett MORE, limits the SEC's authority to seize such profits, ruling that the agency can't seek more than the amount of net income generated through a fraudulent scheme and should use the funds to provide relief for victims.

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Justice Clarence ThomasClarence ThomasDefusing the judicial confirmation process Will the Supreme Court take ObamaCare off life-support? The overlooked significance Kamala Harris brought to the Biden-Harris ticket MORE, the only dissenter from the majority decision, disagreed. Thomas wrote in his dissent that the SEC has no legal authority to seize any profits from the targets of its civil enforcement lawsuits.

The challenge to the agency's authority was brought by Charles Liu, who was sued by the SEC in 2016 for fraud for wooing foreign investors to fund a group of cancer treatment centers. A federal court found that Liu had funneled $20 million of the investors' money to himself, his wife and to marketing companies that were also raising money from investors.

The district court ordered Liu and his wife to surrender the $8.2 million they had kept for themselves. An appeals court rejected Liu's argument that the punishment exceeds the SEC's authority.

The Supreme Court's decision returns the case to the lower courts to ensure that the fine complies with the limits outlined by the justices on Monday.