Washington, D.C., Aug. 31, 2026 (GLOBE NEWSWIRE) — The New Civil Liberties Alliance has petitioned the Supreme Court to hear Spartan Securities, et al. v. Securities and Exchange Commission. NCLA asks the Justices to clarify that securities laws do not allow SEC to take legal action against Americans for nonpublic statements made to private self-regulatory organizations or the Depository Trust Corporation (DTC) when no investor ever saw or heard them. Accordingly, a judge’s order punishing NCLA clients Micah Eldred, Carl Dilley, Spartan Securities Group, and Island Capital Management should be set aside.

SEC took action against NCLA’s clients in 2019, alleging that they participated in two schemes to aid and abet the creation of fake publicly traded companies and the issuance of over-the-counter (penny) stocks. After a 13-day 2021 trial, NCLA persuaded the jury to clear them on 13 of 14 counts, including all counts that accused them of making misstatements to the public.

NCLA’s clients were only found liable for one count: making materially misleading statements or omissions in connection with the sale of stocks in violation of Section 10(b) of the Securities Exchange Act of 1934. But the statements in question were nonpublic, made only to the Financial Industry Regulatory Authority (FINRA) and the DTC—both private organizations overseen by SEC. No investor ever saw, heard, or was influenced by those statements.

Despite SEC never identifying a single victim and failing to show that any investors were harmed, the judge ordered Island Capital Management to pay disgorgement—surrendering profits—to the U.S. Treasury. This order exceeds the permissible boundaries of equitable relief because it operates as a penalty to deter rather than a means of compensating any victims. The U.S. Court of Appeals for the Eleventh Circuit wrongly upheld the disgorgement order in March 2026, disagreeing with decisions by other circuit courts that denied SEC disgorgement where misleading statements or omissions were never seen or heard by investors.

The Supreme Court held in its 2020 Liu v. SEC decision that Section 10(b) of the Exchange Act allows SEC to seek “a disgorgement award that does not exceed a wrongdoer’s net profits and is awarded for victims.” The Eleventh Circuit incorrectly interpreted Liu and subsequent statutory amendments to award SEC disgorgement against NCLA’s clients. But Liu does not allow disgorgement in this case, where there were no victims. In June 2026, the Supreme Court ruled in Sripetch v. SEC that, when SEC can identify an investor victimized by a securities violation, the agency does not have to prove that the investor lost money in order to win disgorgement. But the ruling did not determine whether courts can disregard traditional principles of equity by awarding SEC disgorgement when no victim was identified at all. NCLA asks the Justices to answer that question in Spartan Securities.

NCLA released the following statements:

“Each year, the SEC seeks and is awarded billions of dollars in disgorgement. Just this year, the Supreme Court recognized that the boundaries of the SEC’s substantial disgorgement power are undefined. And a circuit split has developed. The Court should grant certiorari to resolve this question that has been percolating in the lower courts in various forms for nearly a decade.”
— Kara Rollins, Senior Litigation Counsel, NCLA

“The SEC routinely uses equity to behave inequitably. The Supreme Court should take these questions to ensure the SEC follows the law.”
— John Vecchione, Senior Litigation Counsel, NCLA

For more information visit the case page here.

ABOUT NCLA

NCLA is a nonpartisan, nonprofit civil rights group founded by prominent legal scholar Philip Hamburger to protect constitutional freedoms from violations by the Administrative State. NCLA’s public-interest litigation and other pro bono advocacy strive to tame the unlawful power of state and federal agencies and to foster a new civil liberties movement that will help restore Americans’ fundamental rights. 


Joe Martyak
New Civil Liberties Alliance
703-403-1111
joe.martyak@ncla.legal

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