Disgorgement of Ill-Gotten Gains

Disgorgement of Ill-Gotten Gains

The disgorgement of ill-gotten gains refers to the legal process whereby an individual or entity is required to return profits or benefits obtained through unlawful or unethical means. This concept is primarily applied in regulatory and enforcement actions, particularly in areas such as securities law, antitrust law, and corporate fraud.

Disgorgement serves multiple purposes, including deterrence of wrongful conduct, restitution to victims, and the restoration of fairness in the market. It is often pursued by government agencies, such as the Securities and Exchange Commission (SEC) in cases of insider trading or fraud, to reclaim profits that should not have been earned due to violations of laws and regulations.

For example, if a company engages in fraudulent accounting practices that inflate its stock price, the profits gained from selling the overvalued stock may be subject to disgorgement. If the SEC investigates and determines that the gains were illegally obtained, they can compel the company or the responsible executives to return those profits, ensuring that the wrongdoers do not benefit from their misconduct.

Disgorgement is distinct from penalties or fines, as it specifically targets the profits made from illegal activities rather than imposing punitive damages.