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Liu v. SEC
United States Supreme Court
591 U.S. __ (2020)
Charles Liu and his wife, Xin Wang (defendants) solicited nearly $27 million from foreign investors under an immigrant-investor program that allows noncitizens who invest in approved businesses to apply for United States residency. Liu sent a private offering to investors pledging the bulk of contributions to building a cancer-treatment center, with a small fee for administrative expenses. But Liu spent nearly $20 million on salaries and marketing and diverted large sums to personal accounts and a company his wife controlled. Small amounts went toward leasing property and buying cancer-treatment equipment. The Securities and Exchange Commission (SEC) (plaintiff) brought an enforcement action alleging the couple misappropriated millions, violating the offering terms. The trial court enjoined the couple from the program, imposed civil penalties, and ordered disgorgement equal to the amount raised from investors, less what remained in the project’s corporate accounts. The court found the award reasonably approximated profits connected to the couple’s securities violations and ordered joint and several liability for the full amount. The Ninth Circuit affirmed, and the Supreme Court granted review.
Rule of Law
Holding and Reasoning (Sotomayor, J.)
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