Securities Regulation Daily Wrap Up, FRAUD AND MANIPULATION—U.S.: Republican lawmakers seek Supreme Court reversal of SEC’s receivership remedy as contrary to law, (Nov 20, 2025)

By Rebecca E. Hoffman, J.D.

Also filed on Nov. 17 were amicus briefs from the Bitcoin Foundation and the New Civil Liberties Alliance, both asking the high court to grant cert and rule against the SEC.

A group of Republican congresspersons submitted an amicus brief Nov. 17, challenging the Fifth Circuit’s decision to uphold the SEC’s placement of a fraud defendant’s companies and their assets into receivership, calling it a “funding mechanism” that exceeds the boundary of traditional equity (Barton v. SEC, No. 25-465 (U.S. Nov. 17, 2025)).

The Bitcoin Foundation and the New Civil Liberties Alliance (NCLA) filed separate briefs, the former noting that the receivership practice was not authorized by Congress, and the latter asserting that the practice violates the Appointments Clause. All three contend that the SEC’s remedy runs afoul of the Separation of Powers doctrine.

The U.S. government had brought both criminal and civil enforcement actions against real estate developer Timothy Barton, for persistent spending of investor funds earmarked for purchase and development of property. The SEC brought the civil action, and it sought and obtained the seizure and placement into a receivership of entities directly or indirectly controlled by Barton. The Fifth Circuit reversed. On remand, the district court reimposed a receivership of similar scope, holding that Barton’s companies and their assets could be seized if they benefitted from the proceeds of the disputed loans.

A second, differently constituted panel of the Fifth Circuit affirmed and rejected any “proportionality limitation” on the benefit to a company from the subject’s property before the government could seize all its assets. Barton petitioned the Supreme Court for cert on Oct. 14.

Coloring outside the lines? Reps. Nancy Mace (R-SC); Randy Weber (R-TX); Jeff Van Drew (R-NJ); and Lance Gooden (R-TX) argued in their brief that the courts below overreached in their granting of equitable relief. Their challenge arises out of 15 U.S.C. § 78u(d)(5), which permits the SEC to seek equitable relief “that may be appropriate or necessary for the benefit of investors.” This text authorizes federal courts to grant “restitution or disgorgement of ill-gotten gains,” the brief states, but the receivership at issue here goes beyond that, “transforming judicial equity into a vehicle for asset control and funding.”

Expanding the scope of Section 78u(d)(5) encroaches upon other branches’ territory, the brief explained. “The power to seize and administer assets on behalf of the government is an executive function, not a judicial one, and Congress has never assigned it to the courts under § 78u(d)(5).” Further, an agency seizing assets beyond the constitutional appropriations process is tantamount to taxation without representation, the congresspersons asserted. They added that if agencies and courts do not follow the law, they will lose public confidence.

Similarly, the Bitcoin Foundation’s brief noted that throughout history, industries have “matured under statutory clarity, not administrative improvisation.” The blockchain industry likewise needs clarity and predictability of law to thrive. The NCLA asserted in its brief that the district court’s receivership order violates the Appointments Clause. “Congress has never enacted a law authorizing such appointment” explicitly, as it routinely does, and thus “the district court’s appointment of the receiver was constitutionally invalid.”

The case is No. 25-465.

Attorneys: Michael James Edney (Hunton Andrews Kurth LLP) for Timothy Barton. D. John Sauer, U.S. Department of Justice, for the SEC.

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