Supplemental Enrichment or Overreach? Reexamining the SEC’s Limits After Liu

Dmitriy Smirnov

April 7, 2025

Firm News

A recent decision in SEC v. Ahmed offers a stark reminder of how far the SEC will go to grab assets—even those arguably beyond what the law permits. While the Ahmed ruling itself may be defensible under the facts, it highlights a trend that practitioners and those under SEC investigation need to watch closely: the SEC is pushing the boundaries yet again, this time on what constitutes equitable relief, even after the Supreme Court in Liu v. SEC made clear the agency needs to dial it down. We discussed the SEC’s expansion of insider trading law here.

To recap: Iftikar Ahmed, a fugitive trader (he fled the United States, reportedly to India, and never returned to face the charges) was accused of siphoning $67 million from his employer, Oak Management Corp., into personal and family accounts. The SEC froze a broad set of assets and won a $12.5 million supplemental enrichment judgment, which U.S. District Judge Vernon Oliver recently allowed the government to enforce against assets held not by Ahmed, but by Ahmed’s wife, children, relatives, and various trusts.

Of note was Judge Oliver’s finding that disgorgement of the original fraud proceeds was not enough. Because Ahmed controlled these assets for years, the court reasoned, he unjustly benefited from their growth while victims were deprived of use. The judge permitted the SEC to approximate “gains” using a set interest rate—what he called supplemental enrichment—to ensure Ahmed didn’t retain the fruit of his fraud.

But here’s the problem: this logic runs dangerously close to punitive disgorgement, something Liu expressly prohibits. In Liu v. SEC (2020), the Supreme Court limited disgorgement to the net profits resulting from misconduct and required that those funds be returned to victims. The Court emphasized that the SEC cannot use disgorgement to penalize or exceed actual losses. In other words, once victims are made whole, the SEC needs to stop digging.

The Ninth Circuit doubled down on that principle in SEC v. Lou, holding that disgorgement may not exceed investor losses and cannot include gains not causally tied to the fraud. Lou and its progeny have provided clear guardrails on how far the SEC can go—and those guardrails are there for a reason.

To its credit, the Second Circuit seemed to recognize this in 2023 when it vacated the original Ahmed judgment, which relied on an overly broad supplemental enrichment theory. It ordered a careful asset-by-asset analysis, requiring the district court to evaluate whether the appreciation of each asset was truly tied to Ahmed’s wrongdoing.

Judge Oliver’s ruling appears to follow that mandate in form, but in substance, it still pushes the envelope. By allowing the SEC to collect more than victims lost—using interest formulas and a speculative theory based on inferences about asset growth—the court stretches Liu and arguably undermines its core message: disgorgement must be compensatory, not confiscatory.

To be clear, I’m not quibbling with the result in Ahmed. The facts were egregious, and the paper trail—though contested—was enough to tie many of the assets to Ahmed’s fraud. That’s not the issue. The broader trend is what practitioners should be watching. True to form, the SEC is again testing the outer limits of what courts will allow under the banner of “equity.” We may see more attempts to relabel punitive recoveries as “supplemental enrichment.”

For individuals and companies on the receiving end of SEC subpoenas or investigations, this means one thing: don’t assume that once the loss is repaid, the case is over. The SEC may try to go further. Interest, appreciation, or control-based inferences may be used to justify larger recoveries. Ahmed shows that courts may sometimes go along with that, despite Liu.

This is a live issue, and the appellate process is far from over. Shalini Ahmed has already appealed. If this case or others like it reach the Second Circuit or beyond, we may see a renewed push to clarify whether “supplemental enrichment” is a lawful remedy—or just disgorgement dressed in new clothes.

Either way, the SEC needs to cool its jets. The Supreme Court has already spoken. If investors are made whole, that should be the end of the story. That, at least according to Liu and its progeny, is the point of disgorgement. Anything beyond that is punitive. 

Contact Us for SEC Investigation Help

If you receive a Wells notice, an SEC subpoena for documents or testimony, a FINRA 8210 request, a FINRA on-the-record (OTR) interview request, or a similar inquiry from a state regulator, such as Florida’s Office of Financial Regulation (OFR), act immediately. Contact Fridman Fels & Soto, PLLC to speak with an experienced SEC defense attorney. Prompt action is critical to protect your rights whether you need an attorney skilled in insider trading defense or to respond to a subpoena. 

Alejandro Soto is a former senior official with the SEC. He leads Fridman Fels & Soto, PLLC’s Securities Litigation and SEC Defense Practice Group and is admitted in Florida and Washington, DC.