The US Supreme Court on Friday agreed to decide whether the US Securities and Exchange Commission (SEC) may obtain disgorgement as “equitable relief” in civil enforcement actions for securities fraud violations.

This case arose when Charles Liu and his wife, Xin Wang, misappropriated most of the approximately $27 million raised from Chinese investors under an EB-5 Immigrant Investor Program to construct and operate a cancer treatment center in California. The couple never even obtained the required permits for the cancer center despite their expenditures of the money.

Liu and Wang appealed after the US Court of Appeals for the Ninth’s affirmed the trial court’s grant of summary judgment in favor of the SEC, finding that the couple violated Section 17(a)(2) of the Securities Act of 1933. The trial court ordered disgorgement of the entire amount that had been raised from investors, imposed civil penalties equal to the $8.2 million the appellants had personally received from the project, and permanently enjoined the appellants from future solicitation of EB-5 Program investors.

Disgorgement is often used by SEC in civil enforcement actions as a method of increasing recoveries or settlement amounts. A decision by the Supreme Court holding that the SEC cannot obtain disgorgement would have a significant impact on the amount of money the SEC can recover in future civil enforcement actions.