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310:(SEC), the couple did not use the funds towards the project. While they had secured the land, there had been no development work on it during the 18 months after they had gotten the investments, and the SEC found that $ 11.8 million of the funds had been transferred back to Chinese companies owned by Liu and that another large portion had been used for personal expenses by the couple. The SEC had begun its investigation in February 2016 and filed official charges against the couple in June 2016 under the
418:, disgorgement is not "equitable relief" and so he disagreed with the conclusion of the majority. Thomas also wrote of concerns on the disgorgement being returned to investors: "The money ordered to be paid as disgorgement in no sense belongs to the government, and the majority cites no authority allowing a government agency to keep equitable relief for a wrong done to a third party."
384:. Oral arguments were heard on March 3, 2020 in which Liu and Wang's legal counsel continue to argued that Congress never gave the SEC authority to impose disgorgement as penalties, and observers saw the justices forced more on questions to reigning in the size of such disgorgement awards.
306:. The EB-5 program allowed for such visas to be obtained if more than $ 500,000 was invested in certain types of development projects. By 2016, they had obtained investments from at least 50 different Chinese citizens, totaling more than $ 27 million. However, as determined by the
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had not yet prevented the courts from issuing disgorgement award and that in this case, the disgorgement award should not discount the legitimate business expenses, such as rent, which the couple had paid for during the 18 months.
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The judgement vacated the Ninth
Circuit's judgement and remanded the case to that court to re-evaluate the amount of the award based on this decision, including the deduction of legitimate business expenses.
356:) but left open the question "on whether courts possess authority to order disgorgement in SEC enforcement proceedings or on whether courts have properly applied disgorgement principles in this context."
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ruling that disgorgement award was determined to be a penalty. The
Supreme Court accepted the petition in November 2019, which legal analysts believed was to resolve the open-ended question left by
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and asserted they had not defrauded the investors since they were not seeking profits or securities but visas. Among their arguments, the appeal addressed the recent
Supreme Court's decision in
409:. She further wrote "To avoid transforming an equitable remedy into a punitive sanction, courts restricted the remedy to an individual wrongdoer's net profits to be awarded for victims."
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The Court issued its decision on June 22, 2020. In an 8–1 decision, the Court ruled that courts can award for disgorgement in security fraud cases and affirmed the implied stance from
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companies while claiming that they were going to use the money to build a cancer treatment center, through which they would later establish a means for investors to obtain an
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but limited them to the net profits of the conduct from the fraudulent activity. Also, the decision required those funds to be paid back to the defrauded investors. Justice
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399:. Sotomayor affirmed in her decision that "Congress prohibited the SEC from seeking an equitable remedy in excess of a defendant’s net profits from wrongdoing," under
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The
District Court ruled against the couple in April 2017. In addition to permanently enjoining the couple from ever engaging in the EB-5 program, the court issued a
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award, requiring the couple to pay back the full amount that it had obtained from the investors and a civil penalty of $ 8.2 million.
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A disgorgement award that does not exceed a wrongdoer's net profits and is awarded for victims is equitable relief permissible under
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Liu and Wang petitioned to the
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had determined that disgorgement awards were to be treated as penalties (in that case, they were subject to a
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647:"Supreme Court affirms SEC's ability to recoup profits from fraud but places limits"
589:"Breaking: Supreme Court in Liu Upholds Regulatory Disgorgement Remedy, With Limits"
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264:(SEC) for fraudulent activities. The Court ruled in an 8–1 decision that such
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617:"U.S. Supreme Court Sets Limits on SEC's Power to Recover Ill-Gotten Gains"
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awards can be awarded by the courts as equitable relief under the
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680:"Supreme Court Limits S.E.C.'s Power to Recoup Ill-Gotten Gains"
468:"SEC charges couple with fraud in Chinese investor visa scheme"
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Around 2014, Charles C. Liu and Xin Wang, a married couple and
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532:"Supreme Court to Review the SEC's Right to Seek Disgorgement"
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Charles C. Liu, et al., v. Securities and
Exchange Commission
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wrote for the majority, which was joined by all but
Justice
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Baker, H. Gregory; Droz, Alexandra S. (November 19, 2019).
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United States Supreme Court cases of the Roberts Court
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499:"Can the S.E.C. Force Repayment of Ill-Gotten Gains?"
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United States Court of Appeals for the Ninth Circuit
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719:___ (2020) is available from:
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587:Newman, Richard (June 22, 2020).
645:Barnes, Robert (June 22, 2020).
466:Barlyn, Suzanne (June 2, 2016).
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324:. The SEC filed its case in the
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117:granted, 140 S. Ct. 451 (2019).
760:2020 in United States case law
678:Liptak, Adam (June 22, 2020).
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321:§ 77l
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286:Background
60:Docket no.
415:78u(d)(5)
402:15 U.S.C.
317:15 U.S.C.
304:EB-5 visa
275:15 U.S.C.
130:15 U.S.C.
70:Citations
707:Text of
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477:June 22,
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