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What is “disgorgement of ill-gotten gains?”

On Behalf of | May 2, 2024 | Federal Crimes

Contrary to what some people believe, “white collar” crimes are rarely victimless. Often, people lose large amounts of money. Sometimes those losses are easy to calculate. Other times, they require some intricate calculations.

Those who are convicted of these offenses or agree to settle them face large fines and penalties as well as possibly prison time. They’re also required to repay individuals and businesses the money they’ve lost – with interest. This type of restitution is often called “disgorgement of ill-gotten gains” or simply “disgorgement.”

How is the amount of disgorgement determined?

The entity that determines the amount of disgorgement depends on the case. In some cases, it’s a court. In federal cases, it’s typically the Securities and Exchange Commission (SEC). It needs to calculate how much money each party lost because of the offender’s illegal actions.

In many cases, the specific amount is impossible to calculate.  That’s especially true when there are determined to be multiple victims. One court ruled that the calculation must be a “reasonable approximation of the profits that are causally connected to the violation.”

Disgorgement can be required for various types of white collar offenses, from insider trading to getting money from investors for unregistered securities. fraudulent amounts can be significant. Sometimes, executives are required to disgorge money they’ve received in bonuses and other compensation if it’s determined that they acted fraudulently. 

The largest disgorgement order is reported to be that for a former Goldman Sachs CEO for $550 million. That was part of his settlement with the SEC over his role in the subprime mortgage crisis.

It’s crucial to know that disgorgement could be one of the penalties you’ll have to face if you settle or are convicted of fraudulent activity. That’s just one reason to ensure that you have experienced legal guidance throughout your case.