On November 6, the U.S. Securities and Exchange Commission filed a civil complaint, captioned SEC v. Pierre, against a New York investment advisor for allegedly operating a multimillion-dollar Ponzi scheme. The SEC alleges that the defendant promised investors unreasonably high rates of return (20 percent every 60 days) and that he paid those investors, in the face of significant losses, with money from new investors. The defendant also allegedly defrauded investors out of hundreds of thousands of dollars by inducing them to purchase partnership interests in fast food franchises with false promises of high rates of return. The SEC asks the court to, among other things, disgorge the defendant’s allegedly ill-gotten gains.

It is the SEC’s disgorgement request, rather than the facts of the case (serious as they are), that makes Pierre remarkable. As we have recently discussed, it is not clear that the SEC has the power to seek disgorgement, and the Supreme Court recently granted certiorari in Liu v. SEC to resolve that question. The Pierre complaint, however, suggests that the government will press on in seeking disgorgement while the Supreme Court considers the issue. But despite the government’s aggressive stance and its ability to seek injunctions and civil penalties, it likely will find that its bargaining position in cases like Pierre has been diminished in light of the pending Supreme Court review, as there is a chance that, by the time such cases go to trial, disgorgement will no longer be available.