Following up on our ongoing coverage of SEC v. Spartan Securities Group & Island Capital Management, the high-stakes legal battle over SEC enforcement boundaries and disgorgement remedies has reached a major national milestone.
In the latest development, the U.S. Supreme Court has formally requested a response from the federal government regarding the certiorari petition filed by the New Civil Liberties Alliance (NCLA).
Here is the complete update on where the case stands, how recent appellate decisions unfolded throughout 2026, and what the Supreme Court’s involvement means for market participants.
Case Recap: Jury Verdicts vs. Court Remedies
As detailed in our initial report, the SEC brought charges in 2019 against Micah Eldred, Carl Dilley, Spartan Securities Group, and Island Capital Management, alleging a multi-year scheme to aid and abet fake publicly traded companies and over-the-counter (penny) stock creation.
Following a 12-day trial in 2021, the jury delivered a decisive result:
- 13 of 14 Counts Cleared: The jury rejected every count alleging participation in a scheme to defraud or deceive investors.
- Single Surviving Count: Liability was found on only one count involving materially misleading statements or omissions under Rule 10b-5(b).
Despite the SEC failing to identify a single injured investor or prove financial harm, the district court ordered Island Capital Management to surrender profits (disgorgement) directly to the U.S. Treasury, along with ordering substantial civil penalties.
2026 Legal Developments: The Path to SCOTUS
The procedural landscape moved rapidly through 2026 as NCLA challenged both the monetary remedies and the underlying liability rulings.
1. The Eleventh Circuit Panel Decision (January 2026)
A panel of the U.S. Court of Appeals for the Eleventh Circuit upheld the district court’s liability finding and financial penalties. NCLA argued that both the panel and the district court wrongfully assumed the defendants participated in a fraudulent scheme—directly contradicting the jury’s explicit “no liability” findings on all fraud counts and undermining the jury’s constitutional role as factfinder under the Seventh Amendment.
2. En Banc Rehearing Denied (April 2026)
NCLA petitioned the Eleventh Circuit to rehear the case en banc (before the full court of judges) to throw out the penalty order. In April 2026, the Eleventh Circuit denied the petition, exhausting appellate options at the circuit level.
3. Supreme Court Steps In (October 2026)
Following the Eleventh Circuit’s denial, NCLA petitioned the Supreme Court for a writ of certiorari. In October 2026, the Supreme Court signaled strong interest in the issues raised by requesting a formal response from the U.S. Solicitor General on behalf of the SEC.
What Is at Stake Before the Supreme Court?
The petition presents two critical legal questions that could reshape federal regulatory oversight:
- Disgorgement Without Victims: Does ordering disgorgement to the U.S. Treasury—when no victims exist and no investor harm occurred—violate traditional limits on equitable relief (Liu v. SEC) and transform disgorgement into an unauthorized punitive penalty?
- Jury Factfinding Protection: Can courts impose severe remedies based on factual assumptions of fraud when a jury explicitly acquitted the defendants of all fraud and scheme charges?
What’s Next?
With the Supreme Court requesting the government’s response, the SEC must now defend its position and the lower courts’ rulings. A decision on whether the Court will grant full review is expected following the submission of the government’s brief and NCLA’s reply.
We will continue to track this case as filings are made with the Supreme Court. Check back for further updates as new briefs are submitted.
This article is for informational purposes only and should not be construed as legal advice.
About the Author
Brenda Hamilton is a securities attorney with Hamilton & Associates Law Group, P.A.
Hamilton & Associates Law Group, P.A. | Securities Lawyer 101
To speak with a Securities Attorney, please contact Brenda Hamilton at 200 E Palmetto Rd, Suite 103, Boca Raton, Florida, (561) 416-8956, or by email at [email protected].
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Brenda Hamilton, Securities Attorney
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